Hi,

I opened a saving account for my daughter and I am as the custody for the account. I received a form 1099-INT showing $100.66 in 2012. Do I need to report this income on my tax return?

thanks,
Jen

“I opened a saving account for my daughter and I am as the custody for the account. I received a form 1099-INT showing $100.66 in 2012. Do I need to report this income on my tax return?”================>If the account is in the parent's SSN, it's still the parent's account. In which case, it is the parent's income because they never actually opened a custodial account. If your child is the actual owner of the bank account that is recorded in your name as custodian for the child( or it's a custodial account only if the name and SSN on the account are the minor child's. (A minor child won't have taxable income if they only have interest income of less than $950.) , you need to give the child's SSN to the payer. For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. Add them up. If this is the child's ONLY income and it's less than $950, it's "free money.
NOTE: It depends; An interest-earning savings account for children that could also provide tax benefits for the custodian. Interest income that a child receives from an investment account, even when that child is a minor and a custodian maintains control of the account, is taxable to the child unless you make an election to include it in your income. This saves the child from having to file a tax return if she has no other income source. Since most children are in a lower tax bracket than their parents, often the parents prefer to report the income as belonging to the child. The parent should be careful, however, as there are situations which render parts of the income taxable at the parents' rate. There are certain conditions that must be met and certain effects that occur as a result of making this election. First, it is important to realize that all of the income will be taxed at the parents' rate and, depending on the amount, it may push the parents into a higher tax bracket. The IRS disallows some deductions when parents choose to include a child's unearned income with their own, as well. In order to make this election, the child must be less than 19 years old or 24 years old and a full-time student. Other restrictions include making no prepayments for the child's tax throughout the year, her income must be less than $9,500 and she cannot file a joint return for that year. If your child has unearned income of less than $1,900, she receives a portion tax free and the remainder is taxed at a rate of 10 percent. In 2012, the first $950 of investment income that a child receives is not taxable. Therefore, if the child receives $1,300 in interest income for 2012, hier taxes for the year are $35;10%*$350. Amounts in excess of $1,900 are taxable at the parent's tax rate. For example, if the child earns $2,200 in 2012 and you are in the 28 percent tax bracket, then $300;$2200-$1900 is taxable at this rate.So the parent needs to pay $84;28%*$300. Earned income changes the amount of taxable income that a child receives in a given year. When your child earns both earned and unearned, or investment income, then a portion is taxable at your rate if the investment income exceeds $1,900. To determine how much is taxable at the parents rate, first all of the income must be added together. Next, if the child does not itemize deductions, then the standard deduction of her earned income plus $300 is subtracted from his total income. So, if she has $4,000 total income and $2,200 of earned income, then her standard deduction is $2,500. After comparing the remaining amount of $1,500 to the baseline of $900 that the IRS gives, it is determined that $900 is taxable at the parent's rate. If instead the taxable income was $600, this amount would be taxable at your tax rate.