How Will Your Child’s First Job Affect Your Taxes?

Goffstown, NH Resident Has Concerns

As long as your child doesn’t earn more than the standard deduction, $14,600 for the 2024 tax year, they will not be required to file a separate tax return. If your teen earns under $1,150, this is tax-free income. Anything above this will be subjected to taxes. Income earned by your child that is over $2,300 will be subject to the parent’s tax rate. This could mean that a larger amount is taken for taxes. As long as your working teenager is still a minor, relies on you for more than half of their financial support, and lives with you for at least half of the year, you can continue to claim them on your taxes for a dependent deduction.

A Goffstown parent was concerned about her daughter’s part-time job and how this would ultimately end up affecting her tax bill. She contacted the team at Merrimack Tax Associates about these concerns and for guidance.

When the Parent is Responsible for Taxes on a Minor Child’s Income

The more money your teen makes, the higher the tax bill will accumulate. When this income exceeds $2,300, parents will be liable for any associated taxes that go along with this money. When filing on your tax return, this will be taxed at the same rate as the parent’s income. This is often referred to as the “kiddie tax” and can be significant, depending on how much money your teen earned during the year. Despite earning their own money, you can still claim your minor child as a deduction on your tax return as long as you provided more than half of their financial support.

Self-Employment Tax Thresholds for Minors

Teens that are earning money through their own business are responsible for paying taxes. This included providing yard work, babysitting, or some other product or service. The IRS requires teens earning money through self-employment to file a tax return when this money exceeds $400.

Having a working teen in the household is wonderful, as it teaches them responsibility while also giving them some spending money that they have earned. However, as the Goffstown resident learned this can have an impact on the parent’s tax burden. Merrimack Tax Associates was able to work with this parent to plan ahead for her end of year tax bill, taking into consideration the money earned from her working teen.