Flat screen televisions, vacations to warm locales and performance snow machines: the Alaska Permanent Fund Dividend can buy a lot of fun stuff, but don’t forget the tax man.
The permanent fund dividend is taxable income for federal income tax returns. Be sure to set aside enough to cover your tax bill, or consider making an estimated payment when you get your permanent fund dividend, said Internal Revenue Service spokesperson David Tucker. The permanent fund dividend is taxable income for both adults and children.
Special tax rules apply to children under age 18, and certain older children who receive more than $1,900 of unearned income, including the permanent fund dividend and taxable Native corporation dividends.
Because dependents must file a tax return if they have unearned income greater than $950, this year’s permanent fund dividend check of $1,174 means every dependent who received the permanent fund dividend will be required to file a tax return. However, it will not trigger special tax rules for most children this year, unless they have additional unearned income that brings their total above the $1,900 threshold.
Dependent children whose only income is the 2011 permanent fund dividend can choose to file a separate Form 1040-EZ, or parents can report their children’s dividend 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.
For more information on how to report the permanent fund dividend on the Federal Tax Return, contact the IRS at 800-829-1040 or visit www.IRS.gov and input the key words in quotes: “Around the Nation Alaska” in the top right search engine.