Form 8814 and the Foreign Tax Credit: Parents’ Election

Author: Randall Brody, Enrolled Agent | Licensed by the U.S. Department of the Treasury | Last Reviewed: August 2026

Can You Claim the Foreign Tax Credit With a Form 8814 Election?

No. Making the Form 8814 election does not transfer the foreign tax credit to you as the parent.

Form 8814 lets you include your child’s qualifying interest and dividend income on your own return so the child does not have to file a separate return. The election changes only how that income is reported for U.S. purposes. It does not change who is legally liable for the foreign tax under the foreign country’s law.

Under IRC section 901 and the rules in Publication 514, a foreign tax is creditable only if it is imposed on you and you paid or accrued it. When foreign tax is withheld from your child’s dividends, the foreign country has imposed that tax on the child. The parent is not treated as having paid the tax merely because the parent elected to report the underlying income on Form 8814.

You therefore may not claim the child’s foreign tax on your Form 1116. Because the election normally means the child files no return, the foreign tax credit that belongs to the child is simply unavailable for that year.

If the foreign tax is material, compare the Form 8814 election against having the child file a separate return. On a separate return the child may be able to claim the foreign tax credit on Form 1116 (subject to the normal rules and limitations). Form 8814 moves the income to the parent’s return; it does not move a foreign tax credit that the foreign country imposed on the child.

What Is the Parents’ Election on Form 8814?

Form 8814 lets a parent report a child’s interest and dividend income on the parent’s own tax return instead of filing a separate return for the child. The IRS calls it the parents’ election, and it is optional every year.

The election is available only when the child’s income meets specific conditions. The income must consist only of interest and dividends, including capital gain distributions. The child’s gross income must be less than $13,500. The child must be under age 19 at the end of the year, or under age 24 if a full-time student. No estimated tax payments can have been made for the child, and no federal income tax can have been withheld from the child’s income.

When the election is made, the first $1,350 of the child’s income is not taxed. The next $1,350, covering income between $1,350 and $2,700, is taxed at 10%. Any amount above $2,700 is generally added to the parent’s income and taxed at the parent’s rate.

When Form 8814 Makes Sense and When It Does Not

The election exists for convenience. It removes the need to prepare and file a separate return for a child with a small amount of investment income, and for many families that is the whole benefit.

It costs something in return. Adding the child’s income to the parent’s return raises the parent’s adjusted gross income, which can reduce deductions and credits that phase out at higher income, and it taxes most of the child’s income at the parent’s marginal rate rather than the child’s.

For expatriate families the calculation shifts, because the child’s income is frequently foreign sourced and may have had foreign tax withheld against it before it ever reached the account. That is where the question at the top of this page becomes decisive, and it is the reason the election deserves a deliberate decision rather than a default.

Foreign Tax Paid on a Child’s Dividends

A child holding foreign shares or a foreign-domiciled fund may have foreign withholding tax deducted from dividends before payment. For U.S. tax purposes, the gross dividend is reported as income, while the foreign tax withheld is treated separately.

If the child files a separate U.S. return, qualifying foreign income tax legally imposed on the child may generally be claimed by the child as a foreign tax credit, subject to the normal Form 1116 rules and limitations.

If the parent instead makes the Form 8814 election, the foreign tax does not automatically follow the dividend income onto the parent’s return. The foreign tax credit belongs to the person on whom foreign law imposes legal liability for the tax. Where the child is the owner of the investment and the foreign tax is imposed on the child, the parent cannot claim that tax as the parent’s own foreign tax credit merely because the dividend income is reported through Form 8814.

Accordingly, the child’s foreign withholding should not be entered on the parent’s Form 1116 or claimed under the exception that allows certain taxpayers to claim the foreign tax credit without filing Form 1116.

Form 8814 Compared With Form 8615

These two forms handle the same underlying situation in opposite directions and only one applies to a given child in a given year.

• Form 8814 moves the child’s income onto the parent’s return. The child does not file.
• Form 8615 keeps the income on the child’s own return and calculates the tax on the child’s unearned income using the parent’s rate. The child files.

Form 8615 applies more broadly, because it is not limited to interest and dividends and it has no upper income ceiling. Where both are available, the choice is a calculation rather than a preference, and for a family with foreign sourced investment income the foreign tax treatment is usually the deciding factor.

How Expat Families Should Approach the Election

Treat the election as an annual decision rather than a setting. Eligibility depends on figures that change each year and on the child’s income, which changes with the account.

Run the comparison both ways in any year where foreign tax has been withheld on the child’s income. The convenience of not filing a separate return for the child is real, and it is also the smaller of the two numbers in most cases where a credit is at stake.

Tax Samaritan reviews this election as part of expatriate return preparation. Randall Brody is an Enrolled Agent and can represent families before the IRS from any country.

Frequently Asked Questions

Work With An Expat Tax Specialist Before You File

IRS Form 8814 can save time when your child has simple investment income. For expat parents, a careful review is required before deciding to use the form. Foreign accounts, foreign dividends, and foreign investment funds can have a big impact on your taxes. Filing the wrong way can cost you more money and lead to loss of tax savings.

At Tax Samaritan, we help U.S. expat families compare their filing options and choose the approach that fits their full tax picture. If your child has U.S. or foreign investment income, request a tax preparation quote today and let an expat tax specialist review the best path before you file.

Every effort has been made to provide accurate and current tax information. This article is not a substitute for professional tax advice based on your individual circumstances. Tax law changes frequently. Please consult a qualified tax professional before making decisions based on this content.