Unemployment Compensation - Earned or Unearned?

[Gail in Virginia]

If a student drew unemployment this year, would that have to be included in the amounts of unearned income that are taxed at the parent's rate if that student is considered a dependent? 

[gfizer]

I'm anxious to see what everyone thinks about this.  I have an 18 year old senior in high school who drew $16k (yes, $16,000) in unemployment in 2020.  ATX gives me the warning "Return is for a child of age 18 and investment income exceeds $2200. Form 8615 may be required if earned income is not more than half their support."

Obviously, the unemployment is unearned income but it is certainly not investment income.

[Lee B]

Just a thought, how does a high school student meet the "availability for work" requirement and draw this much in unemployment???

[gfizer]

55 minutes ago, cbslee said:

Just a thought, how does a high school student meet the "availability for work" requirement and draw this much in unemployment???

She is a performance academy student meaning that all of her course work is online and can be completed at her convenience.  She doesn't have to be in school during the day.

[Gail in Virginia]

However, I just looked at the instructions for Form 8615 and they say:  For Form 8615, "unearned income" includes all taxable income other than earned income. Unearned income includes taxable interest, ordinary dividends, capital gains (including capital gain distributions), rents, royalties, etc. It also includes taxable social security benefits, pension and annuity income, taxable scholarship and fellowship grants not reported on Form W-2, unemployment compensation, alimony, and income (other than earned income) received as the beneficiary of a trust.

So I think is is taxed at the parents' rate.

[Lee B]

Copied from Pub 596:

"Income That Is Not Earned Income:

Examples of items that aren't earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Don’t include any of these items in your earned income."