While Social Security survivor benefits for children are taxable income, most children don’t make enough in a year to owe any taxes.
Investopedia published the article “Are Social Security survivor benefits for children considered taxable income?” The article explains that survivor benefits are taxed if half of the child's benefits in a year, added to any other income the child earns in the year, is sufficient to require him or her to file a tax return and pay taxes.
If half of the annual benefits plus the child's other income is greater than a base amount set by the IRS, then a portion of the benefits is taxable.
It’s common for checks for Social Security survivor benefits to be made out to an adult, such as a parent or guardian, on the child's behalf.
However, the amount of the benefits doesn’t impact the income tax of the parent.
If both the parent and the child receive benefits, the amount designated for the eligible child is deducted from the check to calculate the parent's tax liability.
The child getting the benefits may still be considered a dependent for tax purposes, if he or she lives with the parent for more than half the year, and the parent pays for more than half of his or her living expenses, such as food, housing, clothing, education, and medical care.
Remember that Social Security benefits are reported to the IRS.
The recipient of the Social Security benefits gets an SSA-1099 form in January. This statement will include the amounts of all benefits received during the previous year.
Reference: Investopedia (January 31, 2018) “Are Social Security survivor benefits for children considered taxable income?”