How do I start a Roth IRA for my child?

As long as your child has earned income, no matter the age, he can contribute to a Roth IRA. If he is a minor, you will have control until the age of majority (18 in most states). It’s kind of like a custodial account…but not a custodial account. You can set up a Roth for your child at any online brokerage and you can fund his IRA with a gift of your own money, which is a good estate planning move for you. Some parents choose to match any contributions their children make, which is a good way to encourage children to save.

Your child can contribute the lesser of $5,500 or her earned income (2018). She doesn’t just have to work for you (think dog-walking, mowing yards, washing cars, etc.); all earnings count toward earned income for Roth purposes. If you pay her $2,000 from your business this year and she makes $1,000 babysitting, she can put $3,000 in a Roth IRA and let the tax-free growth and earnings begin.

You’ll need to file an income tax return reporting your child’s income. If your child works in your unincorporated business, she will not be liable for any FICA taxes or income taxes until she earns more than her standard deduction as long as she is under age 18. Check your state and local laws for other requirements such as licensing, workmen’s comp, and unemployment.

Why should I hire my child?

What is a Roth IRA and do I need one?

How to deduct the cost of raising your child

3 thoughts on “How do I start a Roth IRA for my child?

  1. We started an LLC called iXplore Yellowstone that makes nature apps for average people, in fact it is geared towards kids and families. It’s real, you can download it, and we intend to expand this business. We have gone on trips to specifically take pictures of the kids in natural parks and with certain things (like certain species of trees, flowers, etc.) to use for marketing and within the app. Our kids are 4 and 2. I would like to start and contribute to Roth IRAs for the. I was thinking around $300 a piece. I believe this is legit. The business has a bank account and tax ID number. I was going to write a check and send it in to their Roth, then file taxes for them. Does this seem correct? Thanks a lot!


    1. Hi, Sean, This is a good idea if you would pay the same to strangers for similar photos to be used on your website. I can even agree that a premium might be in order for the family of the app creator. What I cannot guarantee is that this would pass muster on audit. However, $300 sounds reasonable to me and, if you were my client, I’d probably go with it (depending on other facts and circumstances, of course).


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