What is considered taxable income for a child under age 18?

The correct choice identifies that for a child under age 18, taxable income encompasses wages and interest that exceed a certain threshold, specifically $1,250, and this can also vary based on the filing status of the child.

When considering how children are taxed, it is critical to understand that the IRS has specific rules for the taxation of investment income for dependents. Specifically, the $1,250 limit pertains to the standard deduction and the threshold for "unearned income" such as interest and dividends. Wages, on the other hand, are considered earned income and are fully taxable regardless of the amount.

This choice accurately captures the nuances in determining taxable income for a minor, explaining that both earned wages and unearned income from sources like interest can contribute to taxable income depending on the amounts. Thus, if a child earns wages, those would also be included without a threshold limit, whereas only interest (as an unearned income) over the stipulated amount is taxable.

The other response options misrepresent the taxation rules related to children. For instance, limiting taxable income to only interest income or suggesting that capital gains are treated independently overlooks crucial details about how various types of income are classified and taxed for dependents. Additionally, stating that all income