H&R Block Income Tax Practice Exam 2025 – The Complete All-in-One Guide for Exam Success!

The correct choice is the one that states a parent can report a child's income under the kiddie tax rules if the child's income is less than $9,500. The kiddie tax rules apply when a child has a significant amount of unearned income, such as from investments. Under these rules, if a child's unearned income exceeds a certain threshold, it will be taxed at the parent's tax rate instead of the child's lower rates, which is generally intended to prevent tax avoidance.

When a child's income is less than $9,500, it often falls below the threshold where the kiddie tax would apply, allowing the child's income to be treated and taxed under their own tax rates, which tend to be lower than those of adults. This creates a more favorable tax outcome for the family.

This option reflects the IRS guidelines as of the most recent updates, where the threshold for kiddie tax is reviewed and adjusted periodically. In contrast, choices providing higher income levels would not fit within the kiddie tax regulations, as they would typically result in the application of the kiddie tax due to exceeding the threshold for unearned income.