Question - I'd like to pass along a parent success story showing that it is possible to teach your kids the value of a buck.
I play basketball once a week with an "over the hill" gang, and for my birthday my wife wanted to surprise me with a new ball. Talk about a surprise. She spent $100 on an all-leather ball with a gold Nike swoosh.When I told her that was way too much, my 11-year-old daughter piped up, "See, Mom, I told you you were just paying for the name."
P.S. I returned the ball and paid $64 for an official NBA leather ball without the name.
Answer - Your daughter deserves a pat on the back, but Dr. T isn't so sure about you. You paid $64 for a basketball? Sounds a little steep, with or without the swoosh.
Question - Last year my two young children earned interest on savings accounts in their names and dividends from a mutual fund. Do I have to file a separate tax return for them, or can I include their income on my return?
Answer - You can include their income on your return, bu taking the easy way out could cost you money.
If a child's only income is interest and dividends of $5,000 or less, and the child is under age 14, you can report it on your own tax return and skip filing Form 8615 for your children. But when you report a child's on your own return, only the first $500 is tax-free, and the next $500 is taxed in the child's tax bracket.
On the other hand, if you file a separate "kiddie tax" return, the first $650 is tax-free, with the next $650 taxed in the child's bracket. (Either way, any remaining income is taxed in your top bracket.)
Accountants point out that if you're paying someone else to prepare the kiddie-tax return, the added expense could consume any tax savings. But if you're filing on your own, you might as well prepare the extra return - particularly if you're using tax-preparation software, which makes the chore a lot easier.
By the way, the discrepancy is a result of a congressional goof in neglecting to adjust the $500 figure upward to account for inflation. But the lawmakers aren't in any hurry to correct their mistake. They specifically deleted a proposed fix from last year's tax legislation.