During 2020, Montoya (age 15)received $2,230 from a corporate bond. He also received $630 from a savings account established for him by his parents. Montoya lives with his parents and he is their dependent. What is Montoya's taxable income?

Question

Quizplus · Accepted Answer

Montoya's taxable income is calculated by adding his income from the corporate bond and savings account, which equals $2,860. However, he is a dependent of his parents, so he is subject to the kiddie tax. The kiddie tax states that a dependent child's unearned income over $2,200 is subject to taxation at the parents' tax rate. Therefore, Montoya's taxable income is $1,760 ($2,860 - $2,200).

During 2020, Montoya (Age 15)received $2,230 from a Corporate Bond