IRS reminds residents that the PFD is taxable

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Washington, D.C. (KINY) – The Internal Revenue Service reminds Alaskans that the Alaska Permanent Fund Dividend (PFD) is taxable income for both adults and children and must be reported on a federal income tax return. Taxpayers should be sure to set aside enough to cover any potential tax bill, or consider making an Estimated Payment after receiving their PFD.

Special tax rules apply to children under age 18, and certain older children who receive more than $2,300 of unearned income, including the PFD and taxable Native Corporation Dividends. Some people refer to this as the “kiddie tax.”

The 2023 PFD of $1,312 will not trigger the “kiddie tax” rules for most children this year, unless they have additional unearned income that brings their total above the $2,300 threshold. However, because dependents must file a tax return if they have unearned income greater than $1,150, every dependent who received the PFD will be required to file a tax return.

Dependent children whose only income is the 2023 PFD can choose to file a separate Form 1040-EZ, or parents can report their children’s PFD as part of their own tax return using Form 8814. However, using Form 8814 may benefit some parents who are eligible for the Child Tax Credit, as the credit will offset the total tax amount, including the child’s portion of the tax.

All taxpayers who receive the PFD can use the IRS’ Tax Withholding Estimator tool to calculate the correct amount of income tax they should have withheld, and make an estimated tax payment to avoid balance due or penalties when filing.