Form 8814 Instructions: Election, Income Tiers, and 1040 Entry

The instructions for Form 8814 let a parent report a child’s interest and dividend income on the parent’s own return instead of filing a separate return for the child. For the 2026 tax year, the election is available when the child’s gross income from interest and dividends is more than $1,350 and less than $13,500, and when several other conditions are met. The form is shorter than a second return, but it can raise your total tax bill, so work the numbers both ways before you commit.¹

Who Can Use Form 8814

Every one of these has to be true for the child in 2026:

Under 19 at the end of the year, or under 24 if a full-time student.
Only income was interest and dividends, including capital gain distributions and Alaska Permanent Fund dividends. Any earned income, or any other kind of unearned income, disqualifies the election.
Gross income was more than $1,350 but less than $13,500.
No estimated tax payments were made in the child’s name, and no prior-year overpayment was applied forward in the child’s name.
No federal income tax was withheld from the child’s income.
The child does not file a joint return for the year.

If the child’s gross income is $1,350 or less, no tax is owed and no return is required. If it reaches $13,500, or if any earned income is in the mix, the election is off the table and the child files their own return using Form 8615.¹

Which Parent Files

Married and filing jointly: attach the form to the joint return and move on. Married filing separately: the parent with the higher taxable income is the one who must make the election. Divorced or separated: the custodial parent reports the child’s income. The parent identified here is the one whose marginal rate will apply to the child’s income above the threshold, so the choice directly affects the tax owed.¹

If more than one child qualifies, file a separate Form 8814 for each. Each child’s tax is figured independently.¹

What to Gather Before You Start

Pull together your Social Security number, the child’s Social Security number, and every tax document reporting the child’s investment income. The usual ones are Form 1099-INT for interest, Form 1099-DIV for dividends and capital gain distributions, and any Schedule K-1 if the child is a beneficiary of a trust or partner in a partnership.

From those documents you need three figures: the child’s total taxable interest, total ordinary dividends, and total capital gain distributions. Any tax-exempt interest the child received, such as municipal bond interest, goes on Line 1b separately. It doesn’t factor into the tax calculation itself, but it carries over to your return and can affect other computations there.¹

Walking Through the Form

Form 8814 has two parts. Part I collects identifying information for parent and child along with the three income figures. Part II runs the tax calculation. The arithmetic looks dense on the form, but it rests on three brackets.

The Three Income Tiers

The first $1,350 of the child’s unearned income is covered by the child’s limited standard deduction and owes no tax.
The next $1,350 is taxed at a flat 10% under the Form 8814 election, regardless of what type of income it is.
Everything above $2,700 is taxed at the parent’s rate. That amount gets stacked on top of your taxable income and taxed at the marginal rate it falls into.

Line 4 subtracts the $2,700 combined threshold from the child’s total income, producing on Line 6 the net amount that will be taxed at your rate.¹

Splitting Income by Type

Lines 7 through 12 divide the child’s income between ordinary income and capital gains. The split matters because qualified dividends and capital gains keep their preferential rates when they flow through to your return. The $2,700 threshold is applied proportionally across income types, so if half the child’s income is capital gain distributions and half is ordinary interest, the threshold reduction is split evenly between the two.

Lines 13 through 15 produce the final number. The tax on income above $2,700 uses your rates, including the preferential rates for qualified dividends and long-term capital gains. Line 15 is the additional tax you owe because of the child’s investment income.¹

Where the Numbers Go on Your 1040

Attach the completed Form 8814 to your Form 1040, 1040-SR, or 1040-NR. The election is only valid if the form is filed with your return by the due date, including extensions.¹

Two amounts leave the form. The tax from Line 15 goes on Schedule 2 and then into the total tax line on your 1040. The child’s income that’s taxable at your rate, from Line 9, goes on the “Other income” line of your 1040. That second transfer is what increases your adjusted gross income, and the AGI increase is where the hidden costs live.

Should You Make the Election?

The IRS instructions themselves recommend comparing Form 8814 against filing a separate Form 8615 return for the child before choosing. Three cost factors deserve a look.¹

The Flat 10% in the Middle Bracket

On the child’s own return, qualified dividends and capital gains in the $1,350-to-$2,700 range can qualify for the 0% capital gains rate because the child’s income is so low. Under Form 8814, that same slice is taxed at a flat 10% regardless of income type. The maximum extra tax from this is $135 per child, which is small but is pure overpayment you avoid by filing the child’s own return.¹

Deductions You Give Up

Folding the child’s income into your return forfeits deductions the child could have claimed on a separate return:

The additional standard deduction of $2,000 if the child is blind.
Penalty on early withdrawal of the child’s savings, such as cashing a CD before maturity.
Itemized deductions, including charitable contributions the child made from their own funds.

Most children with only investment income have nothing in this list. If your child does, those deductions disappear under the election.¹

The AGI Ripple

Adding the child’s income to your AGI can push you past phase-out thresholds that reduce other benefits. The IRS flags these as potentially affected:

Deduction for contributions to a traditional IRA
Deduction for student loan interest
Child tax credit
Credit for child and dependent care expenses
Education tax credits
Earned income credit
Itemized deductions for medical expenses, state and local taxes, and casualty losses

If you’re near a phase-out on any of these, a few thousand dollars of added AGI can cost far more than the $135 flat-rate issue. A parent close to the earned income credit threshold, for example, could lose hundreds or thousands of dollars of credit from a small increase in reported income.¹

When It Still Makes Sense

The election works best when the child’s investment income is modest, your AGI is comfortably below any phase-out thresholds that apply to you, and the income is mostly ordinary interest rather than qualified dividends or capital gains. In that case the tax cost is close to identical, and you save the time and expense of a second return. If any of the three cost factors above are in play, run the comparison in tax software before filing.

1
Internal Revenue Service. Instructions for Form 8814 – Parents’ Election To Report Child’s Interest and Dividends