My son’s been rocking his first part-time job since April. He works about 20 hours a week, and has managed to save a significant amount of money towards a car, fund a major upgrade for his computer, and still have money in his pocket to socialize with his friends. I was recently telling him that I spent the earnings from my first part-time job very similarly. I also mentioned to him how awesome it was to get a sizable tax refund while I was in high school.
He looked puzzled, and asked, “Why would I get that back?”
I recognized the situation as an excellent opportunity to teach my teenager about how taxes work. It would also ensure I knew how to correctly handle his taxes next year, and whether or not his income would affect my taxes.
Can I Still Claim My Child As A Dependent?
When a child is working, one question that parents commonly have is whether or not that child can still be claimed as a dependent. Children can be claimed as a dependent if the meet the following criteria:
- Child is under the age of 19, or under the age of 24 if they are a full time student
- Lives with person claiming them as a dependent at least half the year
- Does not pay for more than half of their own living expenses
My son’s income will not cause any changes to my tax return, since he meets all the criteria to allow me to continue to claim him as a dependent.
Does My Child Have To File A Tax Return?
Dependents who have gross earned income greater than the standard deduction ($6300 for 2015), or if they have unearned income (investments, or interest income) greater than $1000 must file their own tax return. However, even if their gross earned income is less than $6300 they may still wish to file a tax return if they are owed a tax refund.
My son has currently earned a little over $5200. Using his average monthly income, he’ll earn a projected $7800 by the end of the year. Since this is greater than the standard deduction for 2015, he will have to file a tax return.
Will My Child Get A Tax Refund?
To answer this question, one first has to determine if income taxes are being withheld from the child’s paycheck. This information can be found on the child’s pay stub. If a dependent has gross earned income for the calendar year less than the standard deduction, their tax rate is 0%. Thus, if income taxes had been withheld, they would receive a tax refund in that amount. If their gross earned income is greater than the standard deduction, their tax rate becomes non-zero.
According to an online tax calculator, my son’s federal income tax rate would be 2.05%, or $160. However, by the end of the year he will pay about $630 in taxes, resulting in a federal tax refund of around $470. Additionally, according to the information for the state in which we live (Minnesota), taxpayers are not responsible for any state income tax until income reaches the current threshold of $10,150. This means he would also get all of the estimated $320 in withheld state income tax back as well. Add the two values together, and I estimate that my son will get a tax refund of about $790.
Note: State income tax data is specific to Minnesota. Please reference data for the state in which you reside.
Handling a dependent’s taxes isn’t difficult, one just has to know the rules. After doing some research I feel confident in my knowledge of how my son’s taxes will need to be handled early next year, and my son was happy to learn he may have a tax return heading his way next year.
Do you have a dependent with a part-time job? Do you feel ready to handle their taxes?