The Martins have a teenage son who has become an accomplished bagpiper. With proper promotion and...

The Martins have a teenage son who has become an accomplished bagpiper. With proper promotion and scheduling, the son has good income potential by charging for his services at special events (particularly funerals). However, the Martins are fearful that the income could generate a kiddie tax and cause them the loss of a dependent tax credit. Are the Martins’ concerns justified? Explain

Expert Solution

Martian concern is partially justified. The kiddie tax is applied only on the unearned income and the teenage son has earned the income by charging for his services at special events. Therefore, the kiddie tax will not be applicable in this case.

If the teenage is under age 19 or a full time student under age 24, then he will be considered as a qualified child. In this case, the income of the son does not matter until unless he is self –supportive. In the current case, we are not aware of Martian’s son age or education status.

If child is more than 19 years old and not a full time student; then the dependency exemption will be lost if son earns $4,200 or more.

Thus, the income would not generate a kiddie tax but the loss of a dependent tax credit will depend on the age, education status and income of Martian’s son.

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ekkarill92 answered 2 years ago

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