Children With Dual Citizenship: Savings, Kiddie Tax and Reporting

Dual citizen child tax comes down to three questions: does the child have enough income of their own to file a US return, does the kiddie tax pull some of it into the parents' tax bracket, and which accounts in the child's name must be reported? For most children the answer to the first two is no. The third catches families who open a Junior ISA or accept a generous gift.

This guide is for parents in the UK, and mixed US/UK couples, whose child is a US citizen as well as British or otherwise a UK resident. It assumes the child's US citizenship is already documented. If your child has just been born, start with our guide to the American baby born in the UK; for the Child Tax Credit, see Child Tax Credit for expats. This article covers what comes after: the child's own income, savings and gifts. Figures are US federal amounts for the 2025 tax year, the return most families are filing in 2026, unless stated, and they are adjusted each year.

Does a dual citizen child have to file a US tax return?

A US citizen child must file a US return only if the child's own income passes the IRS filing thresholds, and a parent files for them if they cannot. Citizenship alone does not trigger a return, and a second nationality does not change the test: the IRS treats the child as a US citizen.

The IRS publishes the thresholds in Publication 501. For the 2025 tax year, a single dependent who is not blind or 65 or older must file if any of these apply:

• unearned income of more than $1,350;
• earned income of more than $15,750; or
• gross income of more than the larger of $1,350 or earned income (up to $15,300) plus $450.

There are other triggers in the publication, such as net self-employment earnings of $400 or more, so a child with a small business or a paid online side project should check them. If the child cannot sign, a parent or guardian signs the child's name followed by "By (your signature), parent for minor child".

Currency matters. UK interest, dividends and earnings are converted to dollars for the return. Our note on the IRS exchange rate for sterling explains the choices.

Earned and unearned income for a child

Earned income is pay for work actually done: a paper round, a summer job, modelling fees. Unearned income is everything else, including interest, dividends, gains on investments and taxable trust income. The two sets of thresholds are why a nine-year-old with £2,000 of savings interest may need a return while a sixteen-year-old with a part-time wage may not.

What is the kiddie tax and when does it apply?

The kiddie tax taxes a child's unearned income above a set amount at the parents' marginal rate where that is higher than the child's own. The IRS describes it in Topic no. 553: for the 2025 tax year, the child's unearned income must be more than $2,700 before Form 8615 comes into play.

According to the Form 8615 instructions, the form is filed for a child who meets all of these conditions:

1. The child had more than $2,700 of unearned income.
2. The child is required to file a return.
3. The child was under 18 at the end of the year, or was 18 and did not have earned income of more than half their support, or was a full-time student aged 19 to 23 in the same position.

The instructions also tell parents who exclude foreign earned income on Form 2555 to use a special worksheet to find the parent's taxable income for the form. That is a common reason to have the child's return prepared alongside the parents'. Which parent's return is used depends on the family: married parents filing jointly use the joint return, and for married parents filing separately the instructions say to use the return of the parent with the greater taxable income.

Form 8814: reporting the child's income on the parents' return

Form 8814 lets parents include a child's interest and dividends on their own return so the child need not file. The Form 8814 instructions list the conditions for 2025:

• the child was under 19 at the end of the year (or under 24 if a full-time student);
• the child's only income was interest and dividends, including capital gain distributions;
• the child's gross income was under $13,500;
• no estimated tax was paid for the child and no federal tax was withheld.

Convenience can cost money. The IRS notes that the first $1,350 of the child's income is not taxed under the election, and that income between $1,350 and $2,700 is taxed at 10%. If the child had qualified dividends or capital gain distributions, the parents can pay up to $135 more tax than a separate return would produce, because a separate return can reach a 0% rate on those items. Compare both before choosing.

Illustrative example: a ten-year-old in Leeds has $1,900 of savings interest in the 2025 tax year. Under a Form 8814 election the first $1,350 is untaxed and the remaining $550 is taxed at 10%, which is $55. Because the income is ordinary interest, the extra cost the IRS warns about does not arise; it matters when the child also has qualified dividends or capital gain distributions. Figures are for illustration only and use 2025 US rules.

What counts as a child's savings in the UK and US?

Anything in the child's name or held for them is the child's property, and the US counts the income from it as the child's income. That includes bank accounts, Child Trust Funds and Junior ISAs. How each is treated differs between the two countries.

Account	UK treatment	US treatment for a US citizen child
Cash Junior ISA	Interest is tax-free; limit £9,000 for 2026 to 2027, per GOV.UK	Interest is the child's US income and counts towards the filing and kiddie tax thresholds; foreign account for FBAR
Stocks and shares Junior ISA	Growth and dividends are tax-free	Dividends are US income; UK-domiciled funds are generally PFICs with Form 8621 reporting; foreign account for FBAR
Child Trust Fund	Tax-free; no new accounts since the scheme closed, but payments can continue	Same issues as a Junior ISA, depending on whether it is cash or invested
Ordinary bank or building society account	Parental gifts can be taxed on the parent above £100 of income per parent	Interest is the child's US income; FBAR account if over the threshold

Junior ISAs and Child Trust Funds

GOV.UK states that the money in a Junior ISA belongs to the child, who can take control of the account at 16 and withdraw at 18, and that the limit is £9,000 for the 2026 to 2027 tax year. The child must live in the UK. That ownership is why the US treats the income as the child's own. Our guide to the ISA and PFIC problem and the Form 8621 instructions cover the investment side in detail.

Children born between 1 September 2002 and 2 January 2011 may hold a Child Trust Fund, which GOV.UK says can still receive payments. A parent of a US citizen with an invested Child Trust Fund should check what it holds before the child turns 18, because the same fund issues apply.

The UK parental settlement rule

On the UK side, money a parent gives to an unmarried child under 18 can leave the interest taxable on the parent. Under section 629 of the Income Tax (Trading and Other Income) Act 2005, the rule does not apply where the child's income from that parent's gift is £100 or less in the year; above £100, HMRC's manuals say the whole amount is treated as the parent's income. The £100 test is applied separately for each parent. Gifts from grandparents are outside this rule. Check HMRC's current manual (TSEM4300) before relying on it for a large balance.

How does FBAR and Form 8938 reporting work for a child's accounts?

A child who is a US citizen with foreign accounts must file an FBAR where those accounts together exceeded $10,000 at any time in the calendar year, and a parent or guardian files it if the child cannot. The IRS FBAR page gives the $10,000 test, the 15 April due date and the automatic extension to 15 October.

FinCEN's guidance on filing for a child says the child is responsible for their own report, but a parent, guardian or other legally responsible person files and signs it where the child cannot, entering the filer title as "Parent/Guardian filing for child". The report is in the child's name. A parent who is a joint holder of, or has signing authority over, the child's account may also have reporting of their own. Our FBAR requirements guide explains how the tests work.

Form 8938 is a separate test. For a single US citizen living abroad, the IRS gives the threshold as more than $200,000 on the last day of the year or more than $300,000 at any time in the year, on its FATCA summary page. A child's savings seldom reach that level, but the figure is worth knowing before a large inheritance or a property sale lands in the child's name. The FBAR threshold is far lower, so it is the one families usually meet.

Do gifts from UK grandparents have to be reported?

A US citizen child who receives gifts from non-US relatives usually pays no US tax on them, but large gifts must be reported on Form 3520. The Form 3520 instructions require the form from a US person who received more than $100,000 in the year from a nonresident alien individual or foreign estate, aggregating persons who are related to each other.

The child is the US person, so a parent completes and files it for the child. The instructions tie the due date to the income tax return, including extensions. A late or incomplete form can attract a penalty: the instructions describe a 5% per month penalty on the amount of the unreported gift, up to 25%, so the cost of missing it is not trivial. The gift itself is not income, but the rule exists so the IRS can see the money arriving.

The test is applied to what the child receives in the year, so two grandparents who give $60,000 each to the same child are likely to be added together as related donors. Smaller gifts below the threshold are not reportable on Form 3520. For inheritances, see inheritance from the UK for a US citizen.

What do families with dual citizen children get wrong?

• Treating a Junior ISA as invisible. It is tax-free in the UK only. The US sees income, a foreign account and, if invested, PFICs.
• Assuming a grandparent's gift belongs to the parents. Money given to a child is the child's, so the reporting sits in the child's name.
• Ignoring the small thresholds. The unearned income filing level of $1,350 for 2025 is lower than many parents expect, and a balance of a few thousand pounds in savings can pass it.
• Waiting for age 18. Missed FBARs and Forms 8621 from childhood become the young adult's problem, and clearing them up is easier while parents still have the statements.
• Forgetting that a child's return needs an identifier. A US citizen child uses a Social Security number. The IRS issues an ITIN only to people who are not eligible for one.

When a dual citizen child grows up

At 18 the child becomes responsible for their own US filings. Some young adults then decide whether to keep US citizenship. Renunciation is an adult decision with its own tax consequences, and we cover it in our guide to renouncing US citizenship. Whatever they decide, a clean filing history makes the choice easier.

How we help families with dual citizen child tax

US/UK Cross Border Tax is a team of US CPAs and UK tax advisers working as one team, in London, Manchester, New York and San Francisco. For families with dual citizen children we check each child's income against the thresholds, prepare any return, FBAR or Form 3520 in the child's name, and review savings before accounts are opened. See our individual tax returns and foreign income and FBAR services, or contact us for a fee quote.