Assume Karen is 12 years old and her only income is $2,500 of interest income from a bank account with money her parents have given her to save for college.What are the options Karen has for filing her tax return?

Question

Quizplus · Accepted Answer

Since Karen is a minor and her only income is from interest income, her parents have the option to include her in their tax return. By doing so, they would pay tax on $400 of Karen's interest income at their rate of tax and on $1,050 at a 10% rate. This would likely result in a lower tax liability for Karen and her parents than if she were to file a separate tax return at her individual rate of tax. Therefore, it is best for Karen's parents to elect to include her in their tax return.

Assume Karen Is 12 Years Old and Her Only Income