Teen Taxes & Summer Jobs: A Parent's Guide

1. Does my teen need to file?

A dependent must file if any of these are true:

• Earned income (W-2 wages) exceeds the dependent standard deduction for the year.
• Unearned income (interest, dividends, capital gains) is more than $1,350.
• Mixed income: even when both tests above pass, filing is required if gross income (earned + unearned combined) exceeds the dependent standard deduction — e.g., $5,000 in wages plus $1,000 of interest is $6,000 gross against a $5,450 deduction. This is the trigger most people miss (Pub 501, Table 2).
• Net earnings from self-employment (1099 profit × 0.9235) are $400 or more — that means about $434 of net profit.

2. The dependent standard deduction (the tax-free ceiling)

The formula is the same for 2025 and 2026: the greater of $1,350 or (earned income + $450), capped at the single standard deduction — $15,750 for 2025 and $16,100 for 2026. So a teen who earns $16,100 in W-2 wages in 2026 owes zero federal income tax; a teen who earns $20,000 uses $16,100 of it as the deduction and pays tax on the remaining $3,900. (A blind unmarried dependent adds $2,050 for 2026, so $18,150 is tax-free; married or blind dependents have their own filing thresholds — see Pub 501, Table 2.)

3. The 1099 gig trap

The rules above are for income tax. Self-employment tax is separate. Once a teen's 1099 / gig net earnings — profit × 0.9235 — hit $400 (about $434 of net profit), they owe SE tax of profit × 0.9235 × 15.3% — even when their income tax is $0. The dependent standard deduction doesn't shield SE tax. A teen tutoring, doing DoorDash, or selling on Etsy at any real volume crosses this line quickly.

4. The withholding-refund case

Most summer employers withhold federal tax by default. If your teen's earnings never reach the filing threshold, that withholding is theirs to reclaim — but only by filing. "Doesn't have to file" and "shouldn't file" are not the same sentence.

The kiddie tax — Form 8615 explained (and the 8814 trap)

The kiddie tax targets a specific move: parents shifting investment income to their kids to pay tax at kid rates. The mechanics for 2025 and 2026:

• First $1,350 of the child's unearned income — tax-free only when the child has little or no earned income. The standard deduction covers wages and interest together, so with a job the wages use it up first: a teen with $5,000 of wages and $1,000 of interest has a $5,450 deduction and $550 of taxable income.
• Next $1,350 — at the child's own rate (usually 10%).
• Above $2,700 — at the parents' marginal rate.

Who it applies to (whether or not the child is your dependent):

• Any child under 18 at the end of the year.
• 18-year-olds whose earned income is ≤ half their support.
• Full-time students ages 19–23 whose earned income is ≤ half their support (yes, it can follow them through college).

In every case, at least one of the child's parents must be alive at the end of the year, and the child must not file a joint return. Form 8615 is required once the child has more than $2,700 of unearned income and must file a return.

Custodial accounts trigger kiddie tax

UTMA/UGMA accounts belong to the child for tax purposes. Interest, dividends, and realized gains inside them count as the child's unearned income and are the exact trigger the kiddie-tax rules were built for. This is why gifting through a 529 (which grows tax-deferred and pulls tax-free for qualified education) is usually cleaner than piling into a custodial brokerage.

The teen-Roth move (this is the good one)

Any teen with earned income can fund a Roth IRA up to min(earned income, annual IRA limit). A summer job earning $4,000 opens a $4,000 Roth contribution for the year. Forty years at any reasonable market return turns that into an outsized retirement nest egg — because the compounding runway is enormous. If the parents run a business and the kids do genuine work, wages paid to them can fund this while shifting income out of the parents' higher bracket (be strict about documentation).

If a Roth was funded but the teen ended up not having enough earned income, that's an excess contribution — see the Excess Roth IRA Contribution Fixer.