A Roth IRA for kids, more precisely a custodial Roth IRA, is a tax-advantaged retirement account that an adult opens and manages for a minor who has earned income. The child owns the account; the adult controls it until the child reaches the age of majority. The requirement is that the child earned the money through work.
A child can hold a Roth IRA at any age if they have earned income. For 2026, the contribution is the lesser of $7,500 or the child’s total earned income for the year (Source: IRS Notice 2025-67). Because most working children earn well under $7,500, their earned income, not the dollar cap, usually sets the ceiling.
What is a Roth IRA for kids?
A Roth IRA for kids is a custodial Roth IRA, a Roth account opened in a minor’s name and managed by an adult custodian, funded with the child’s earned income. The child is the beneficial owner. The Internal Revenue Code sets no minimum age to contribute; eligibility depends on having compensation from work (Source: IRS Publication 590-A). Contributions are after-tax, and qualified withdrawals can be tax-free.
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A Roth IRA for kids is a custodial Roth IRA: a Roth account opened in a minor’s name and managed by an adult custodian, funded with the child’s own earned income. The child is the beneficial owner. The custodian, usually a parent or grandparent, makes the investment decisions and handles paperwork until the child legally takes control.
The custodial structure exists because minors generally cannot enter contracts on their own. The Internal Revenue Code does not set a minimum age to contribute to a Roth IRA; eligibility depends solely on having compensation from work (Source: IRS Publication 590-A). The IRS states plainly that you can be “any age” as long as you have earned income.
Money in the account grows without annual tax on interest, dividends, or gains. Because a Roth is funded with after-tax dollars, there is no upfront deduction, but qualified withdrawals later can come out entirely tax-free (Source: IRS, Roth IRAs). For a child with decades before retirement, that long compounding runway is a defining feature of the account.
Who qualifies: the earned income rule
A child qualifies for a Roth IRA only with earned income, also called compensation. That means wages, salaries, tips, professional fees, and net self-employment earnings from personal services (Source: IRS Publication 590-A). Gifts, allowances, birthday money, interest, dividends, and rental income do not count. The dollar amount contributed cannot exceed the child’s earned income for the year.
A child qualifies for a Roth IRA only if they have earned income, also called compensation. Gifts, allowances, birthday money, and investment income do not count. Earned income means wages, salaries, tips, professional fees, and net self-employment earnings from providing personal services (Source: IRS Publication 590-A).
The IRS defines compensation as “wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services,” plus net earnings from self-employment where personal services materially produce the income (Source: IRS Publication 590-A). Interest, dividends, pension income, and rental income are explicitly not compensation.
What counts and what does not
| Counts as earned income | Does not count |
|---|---|
| W-2 wages from a job (retail, restaurant, lifeguarding) | Allowance from parents |
| Babysitting, pet sitting, dog walking | Gift money or inheritance |
| Lawn mowing, yard work, snow shoveling | Birthday or holiday cash |
| Paid work in a family business (with real duties) | Interest, dividends, or capital gains |
| Freelance or gig work (tutoring, content, crafts) | Rental or other passive income |
Paid chores can count when they resemble genuine work rather than routine household tasks, but the line is fact-specific. Standard family chores tied to an allowance are generally treated as household duties, not compensation. Because the distinction can be uncertain, families often document the arrangement carefully, which the next section covers.
2026 contribution limits for a child’s Roth IRA
For 2026, the contribution to a child’s Roth IRA is the lesser of $7,500 or the child’s total earned income for the year (Source: IRS Notice 2025-67; IRS Publication 590-A). The $7,500 dollar cap binds only if the child earns at least $7,500. For most working children, actual earned income is the real limit, and the age-50 catch-up does not apply.
For 2026, the contribution to a child’s Roth IRA is the lesser of $7,500 or the child’s total earned income for the year (Source: IRS Notice 2025-67; IRS Publication 590-A). The $7,500 dollar cap only binds if the child earns at least $7,500. For most working children, actual earned income is the real limit.
The 2026 IRA limit rose to $7,500 from $7,000 in 2025 (Source: IRS Notice 2025-67). This is an aggregate limit across all of a person’s traditional and Roth IRAs combined. The age-50 catch-up does not apply to minors.
Worked example
If a 15-year-old earns $1,200 from summer yard work in 2026, the maximum Roth contribution is $1,200, not $7,500, because the contribution cannot exceed earned income (Source: IRS Publication 590-A). If the same teen earned $9,000, the contribution would be capped at the $7,500 dollar limit. The money deposited need not be the child’s exact dollars.
If a 15-year-old earns $1,200 from summer yard work in 2026, the maximum Roth contribution that year is $1,200, not $7,500, because the contribution cannot exceed earned income (Source: IRS Publication 590-A). If the same teen earned $9,000, the contribution would be capped at the $7,500 dollar limit.
The money contributed does not have to be the child’s exact dollars. A parent or grandparent can gift the cash to fund the account, as long as the total contribution does not exceed the child’s earned income for that year. The earned income sets the ceiling; the source of the deposit does not.
| Child’s 2026 earned income | Maximum 2026 Roth contribution |
|---|---|
| $600 | $600 |
| $3,000 | $3,000 |
| $7,500 | $7,500 |
| $12,000 | $7,500 (dollar cap) |
Roth income phase-outs exist but rarely matter for children. In 2026, the single filer phase-out runs from $153,000 to $168,000 of modified adjusted gross income (Source: IRS Notice 2025-67). Working minors almost never approach that range, so the phase-out generally does not limit a kid’s Roth.
The tax benefits and why they favor children
A Roth IRA is funded with after-tax dollars, so there is no upfront deduction, but growth is federal-income-tax-free and qualified withdrawals are tax-free (Source: IRS, Roth IRAs). This structure tends to favor children because many working minors sit in a 0% or very low federal tax bracket, and a child’s earnings often fall below the standard deduction.
A Roth IRA is funded with after-tax dollars, so there is no upfront deduction, but growth is federal-income-tax-free and qualified withdrawals are tax-free (Source: IRS, Roth IRAs). This pay-tax-now structure tends to favor children because many working minors sit in a 0% or very low federal tax bracket.
When a child’s total earnings fall below the standard deduction, they may owe little or no federal income tax on that income in the first place. For 2026, the standard deduction for a single filer is $16,100 (Source: IRS, Rev. Proc. 2025-32; IRS Newsroom, tax year 2026 inflation adjustments). A defining feature of a Roth is that tax is paid on the contribution rather than on qualified growth or qualified withdrawals; whether that treatment is favorable in a given situation depends on the individual facts.
Roth IRAs also carry no required minimum distributions during the owner’s lifetime (Source: IRS, Roth IRAs). That contrasts with the rules governing traditional retirement accounts. For readers comparing account types, our overview of required minimum distributions for 2026 explains how RMDs apply elsewhere.
Illustrative compounding over a long horizon
The long time horizon is the practical reason families consider funding a child’s Roth early. Tax-free compounding over several decades means a contribution made in childhood has many more years to grow than the same dollars saved in mid-career. The size of any future balance depends entirely on the rate of return, the amount and timing of contributions, and fees, none of which can be predicted. This is a description of how compounding works over time, not a projection of any particular result.
Withdrawal rules: contributions versus earnings
Roth withdrawals follow two sets of rules. Contributions, the money originally put in, can be withdrawn at any time, tax-free and penalty-free, regardless of age or how long the account has been open (Source: IRS, Roth IRAs). Earnings are treated differently and can trigger income tax and a 10% additional tax if pulled out before a distribution is qualified.
Roth withdrawals follow two different sets of rules. Contributions, the money originally put in, can be withdrawn at any time, tax-free and penalty-free, regardless of age or how long the account has been open (Source: IRS, Roth IRAs). Earnings are treated differently and can trigger tax and a penalty if pulled out early.
The IRS confirms that “you can withdraw your contributions at any time without tax consequences, regardless of your age or how long you’ve had the account” (Source: IRS, Roth IRAs). Distributions come out in a set order: contributions first, then converted amounts, then earnings (Source: IRS Publication 590-B).
When earnings come out tax-free
Earnings are tax-free and penalty-free only in a qualified distribution, which requires meeting the 5-taxable-year holding period plus one qualifying event: reaching age 59½, disability, death, or a first-time home purchase up to a $10,000 lifetime cap (Source: IRS Publication 590-B; IRS, Roth IRAs). Meeting only one of these two conditions is not enough for tax-free earnings.
Earnings are tax-free and penalty-free only in a qualified distribution, which requires the 5-taxable-year holding period to be met and one qualifying event: reaching age 59½, disability, death, or a first-time home purchase up to a $10,000 lifetime cap (Source: IRS Publication 590-B; IRS, Roth IRAs). Meeting only one condition is not enough.
Non-qualified withdrawals of earnings before age 59½ are generally included in income and hit with a 10% additional tax (Source: IRS Topic No. 557). Several exceptions waive that 10% penalty, including qualified higher-education expenses, a first-time home purchase up to $10,000, disability, and a qualified birth or adoption distribution up to $5,000.
Key nuance: a penalty exception can waive the 10% additional tax on earnings without making those earnings income-tax-free. For example, using earnings for college can avoid the penalty, yet income tax may still apply if the distribution is not otherwise qualified (Source: IRS Topic No. 557; IRS Publication 590-B).
The FAFSA and financial-aid angle
Qualified retirement accounts, including a child’s Roth IRA, are not reported as assets on the Free Application for Federal Student Aid, or FAFSA (Source: 2026-2027 Federal Student Aid Handbook). However, distributions from such accounts do count as income (Source: same). A Roth withdrawal during college can therefore affect a later FAFSA on the income side rather than the asset side.
Qualified retirement accounts, including non-education IRAs and a child’s Roth IRA, are not reported as assets on the Free Application for Federal Student Aid (FAFSA) (Source: 2026-2027 Federal Student Aid Handbook; studentaid.gov). That is generally a difference from taxable custodial accounts, whose balances are counted as assets. The relevant consideration is on the income side, not the asset side.
The Federal Student Aid Handbook states that the value of retirement plans is not counted as an asset, but distributions do count as income (Source: 2026-2027 Federal Student Aid Handbook). A Roth withdrawal taken while a student is in college can therefore be reported as income on a future FAFSA, which is one factor families weigh when deciding whether and when to tap a child’s Roth for college. Financial-aid formulas change periodically, and current treatment can be confirmed against the applicable-year FAFSA guidance.
Documenting a child’s earned income
Documenting a child’s earned income is the practical step that supports a Roth contribution if the IRS asks. No IRS form is filed simply to prove earned income, but a contemporaneous record of the work, hours, and pay substantiates that the income was genuine compensation (Source: IRS Publication 590-A). A dated log, invoices, and any W-2 the child received all serve this purpose.
Documenting a child’s earned income is the practical step that supports a Roth contribution if the IRS ever asks. There is no IRS form filed simply to prove earned income, but a contemporaneous record of the work, hours, and pay is what substantiates that the income was genuine compensation (Source: IRS Publication 590-A defines the compensation requirement).
For self-employment work such as babysitting or yard care, families commonly keep a simple log. A clean paper trail matters most when the income comes from informal cash jobs rather than a W-2 employer. Records that families often keep include:
- A dated log of jobs, hours worked, and amounts paid.
- Invoices or receipts for self-employment work.
- Payment records, such as check or transfer confirmations, which are easier to trace than cash.
- Any W-2 the child receives from a job.
- Awareness that net self-employment earnings of $400 or more generally trigger self-employment tax and a filing requirement (Source: IRS Topic No. 554; Instructions for Schedule SE, Form 1040).
Paying your own child through a business
A business owner can employ their own child and pay reasonable wages for real work, which can create the earned income needed to fund a Roth. This is available only when the child performs genuine, age-appropriate duties and the pay is reasonable for that work (Source: IRS Publication 590-A defines compensation). Wages for no real service, or far above market rate, invite scrutiny.
Business owners can employ their own children and pay reasonable wages for real work, which can create the earned income needed to fund a Roth. The rules allow this only when the child performs genuine, age-appropriate duties and the pay is reasonable for that work. Wages paid for no real service, or amounts far above market rate, invite scrutiny. Families using this approach typically issue a W-2 and keep employment records like any other worker.
How to open a Roth IRA for a child
Opening a custodial Roth IRA follows a short, standard process at brokerages that offer the account type. The adult applies as custodian, supplies identifying information for both parties, funds the account up to the lesser of $7,500 or the child’s 2026 earned income (Source: IRS Notice 2025-67), and selects investments. The child is the owner throughout; the custodian manages the account.
Opening a custodial Roth IRA follows a short, standard process at brokerages that offer the account type. The adult applies as custodian and supplies identifying information for both parties. Many national brokerage firms offer custodial Roth IRA accounts; availability and features vary by provider, so families typically compare current offerings directly.
- Choose a brokerage that offers a custodial Roth IRA.
- Provide the Social Security number and date of birth for both the custodian and the child.
- Complete the custodial Roth IRA application, with the adult named as custodian.
- Fund the account up to the lesser of $7,500 or the child’s 2026 earned income (Source: IRS Notice 2025-67; IRS Publication 590-A).
- Select investments, such as a low-cost broad index fund or a target-date fund, based on the family’s goals and risk tolerance.
Once funded, the account holds uninvested cash until investments are chosen. Common choices among long-horizon investors include diversified index funds and target-date funds, though the appropriate mix depends on individual circumstances. This is a description of available options, not a recommendation.
What happens when the child grows up
A custodial Roth IRA converts to the child’s sole control when they reach the age of majority. That transfer is governed by state law under the Uniform Gifts or Transfers to Minors Act (UGMA/UTMA) and the custodian’s account agreement, not by the IRS. The age varies by state, commonly 18 or 21. The Roth tax treatment continues unchanged; only control shifts.
A custodial Roth IRA is designed to convert to the child’s sole control when they reach the age of majority. That transfer is governed by state law under the Uniform Gifts or Transfers to Minors Act (UGMA/UTMA) and the custodian’s account agreement, not by the IRS. The age varies by state, commonly 18 or 21, and in some cases later.
After the transfer, the young adult controls contributions, investments, and withdrawals. The Roth tax treatment continues unchanged; only the control shifts. Because the account rules interact with broader retirement-tax planning, families sometimes revisit strategy at that stage. How other retirement accounts and any future Roth conversion fit into an overall plan is a set of factors to weigh with a qualified tax or financial professional; this article is educational and is not advice.
Work with Q3 Advisors
Q3 Advisors is a registered investment adviser focused on retirement tax planning. This article is educational and is not advice; for guidance on your own circumstances, consult a qualified tax or financial professional.
Frequently asked questions
At what age can a child open a Roth IRA?
There is no minimum age to have a Roth IRA. The IRS states a person can be “any age” as long as they have earned income (Source: IRS Publication 590-A). Because minors usually cannot open accounts themselves, an adult opens a custodial Roth IRA and manages it until the child reaches the age of majority. The child is the owner throughout.
Can I open a Roth IRA for my child?
Yes. An adult, usually a parent or grandparent, can open a custodial Roth IRA for a child who has earned income and serve as custodian. The adult manages the account, but the child is the owner (Source: IRS Publication 590-A). The contribution cannot exceed the child’s earned income for the year, up to the annual dollar limit.
How much can a child contribute to a Roth IRA?
For 2026, a child can contribute the lesser of $7,500 or their total earned income for the year (Source: IRS Notice 2025-67; IRS Publication 590-A). The 2025 limit was $7,000. Because most working children earn under $7,500, their earned income is typically the binding cap, not the dollar limit.
What counts as earned income for a child’s Roth IRA?
Earned income means compensation for personal services: wages, salaries, tips, professional fees, and net self-employment earnings such as babysitting, dog walking, or yard work (Source: IRS Publication 590-A). Interest, dividends, rental income, gifts, and allowances do not count. The income must come from actual work the child performed.
Do allowances or chores count as earned income for a Roth IRA?
Allowances and routine household chores generally do not count as earned income, because they are not compensation for services in a trade or business (Source: IRS Publication 590-A). Genuine paid work, such as a job, self-employment, or real duties in a family business, can count when properly documented as compensation.
What happens to a custodial Roth IRA when the child turns 18?
The account transfers to the child’s control at the age of majority, which varies by state, commonly 18 or 21, under UGMA/UTMA law and the custodian’s agreement rather than IRS rules. The Roth tax treatment continues; only control shifts to the now-adult owner, who manages future contributions and withdrawals.
Can a Roth IRA be used for college?
Contributions can be withdrawn anytime tax-free and penalty-free (Source: IRS, Roth IRAs). Earnings used for qualified higher-education expenses can avoid the 10% early-distribution penalty, but income tax may still apply if the distribution is not otherwise qualified (Source: IRS Topic No. 557). A withdrawal may also count as income on a future FAFSA (Source: 2026-2027 Federal Student Aid Handbook).
How do I prove my child’s earned income to the IRS?
Keep contemporaneous records: a dated log of hours and pay, invoices or receipts for self-employment work, and any W-2 the child received (Source: IRS Publication 590-A establishes the compensation requirement). Payment by check or transfer creates a more traceable record than cash. For a family business, issuing a W-2 for real work documents the wages.
Sources
IRS Notice 2025-67, “2026 Amounts Relating to Retirement Plans and IRAs” (https://www.irs.gov/pub/irs-drop/n-25-67.pdf).
IRS Newsroom (IR-2025-111, Nov. 13, 2025), “401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500” (https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500).
IRS Newsroom, “IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill” (https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill).
IRS Revenue Procedure 2025-32, tax year 2026 inflation-adjusted amounts (https://www.irs.gov/pub/irs-drop/rp-25-32.pdf).
IRS Publication 590-A, “Contributions to Individual Retirement Arrangements” (https://www.irs.gov/publications/p590a).
IRS Publication 590-B, “Distributions from Individual Retirement Arrangements” (https://www.irs.gov/publications/p590b).
IRS, “Roth IRAs” (https://www.irs.gov/retirement-plans/roth-iras).
IRS Tax Topic No. 557, “Additional Tax on Early Distributions from Traditional and Roth IRAs” (https://www.irs.gov/taxtopics/tc557).
IRS Tax Topic No. 554, “Self-Employment Tax” (https://www.irs.gov/taxtopics/tc554).
IRS, Instructions for Schedule SE (Form 1040) (https://www.irs.gov/instructions/i1040sse).
U.S. Department of Education, 2026-2027 Federal Student Aid Handbook, “Filling Out the FAFSA Form” (https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2026-2027/application-and-verification-guide/ch2-filling-out-fafsa-form).
Federal Student Aid, “Reporting Your Assets on the FAFSA Form” (https://studentaid.gov/help/asset-net-worth).
