Yes — you can open a custodial Roth IRA for your child at any age, as long as the child has earned income from actual work. The account is registered in the child’s name and Social Security number, but you make the investment decisions and manage contributions until the child reaches the age of majority under your state’s law. For 2026, you can contribute up to $7,500 or the child’s total earned income for the year, whichever is less.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Because contributions grow tax-free for decades, even small deposits made during childhood can add up to a substantial retirement balance.
The Earned Income Rule
The one requirement you cannot work around is earned income. The IRS defines it as wages, salaries, tips, and net self-employment earnings.2Office of the Law Revision Counsel. 26 USC 32 – Earned Income For most kids, that means a part-time job, babysitting, mowing lawns, tutoring, or freelance work like selling crafts online.
Allowances, birthday cash, investment dividends, and interest from a savings account do not count. Those are unearned income and cannot support any IRA contribution. Your child also doesn’t need to earn enough to file a tax return for the income to qualify. A 14-year-old who earns $2,000 mowing lawns over the summer has $2,000 of eligible compensation, even though that amount falls below the filing threshold.
The money used to fund the contribution doesn’t have to come out of the child’s own bank account. A parent, grandparent, or anyone else can make the deposit, provided the total doesn’t exceed what the child actually earned.3Internal Revenue Service. Retirement Topics – IRA Contribution Limits A common approach: the child keeps their paycheck for spending money, and a parent funds the Roth on their behalf.
How Much You Can Contribute in 2026
The 2026 annual Roth IRA contribution ceiling is $7,500.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 For your child, the actual ceiling is the lesser of $7,500 or their total earned income for the year. If your teenager brings home $4,200 from a summer job, $4,200 is the maximum you can put in — not a dollar more.
All contributions go in with after-tax dollars, so there’s no upfront deduction. That’s the Roth tradeoff: you pay tax now in exchange for tax-free growth and withdrawals in retirement. For a child with little or no tax liability, it’s an especially good deal.
Over-contributing triggers a 6% excise tax on the excess amount for every year it sits in the account.4Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities If you catch the mistake before the tax filing deadline, you can withdraw the excess (plus any earnings on it) and avoid the penalty. Income phase-outs technically apply to Roth IRAs but are not a real concern for a working minor.
Paying Your Child Through a Family Business
If you run a sole proprietorship or a partnership where both partners are the child’s parents, hiring your child unlocks a meaningful tax break. Wages paid to a child under 18 in that arrangement are exempt from Social Security and Medicare taxes.5Internal Revenue Service. Tax Treatment for Family Members Working in the Family Business The exemption does not apply if the business is a corporation or if the child is 18 or older.
The IRS scrutinizes these arrangements. Pay has to be reasonable for the work — roughly what you’d pay a non-family employee for the same tasks. Paying a 10-year-old $50 an hour to shred paper will draw attention. Legitimate work includes filing, cleaning, inventory help, basic data entry, or assisting at events.
Document everything as if an audit is coming, because the burden of proof is on you. Keep a log of hours worked, a description of tasks, and the pay rate. If the child is old enough to get a W-2, issue one. That paper trail is what protects the deduction and the Roth contribution if the IRS questions whether the wages were real.
Opening the Account
Not every brokerage offers custodial Roth IRAs, so check before you apply. Most large firms do, and the online application usually takes under 30 minutes. You’ll need:
- Social Security numbers for both the child and the custodian.
- Date of birth and legal name for both, matching a government-issued ID.
- A driver’s license or passport for the custodian to satisfy identity verification.
- Proof of the child’s earned income: a W-2, a 1099-NEC, or a detailed ledger showing dates, clients, tasks, and payment amounts for self-employment work.
Most brokerages ask you to name a successor custodian who takes over if the primary custodian dies or becomes unable to serve. Approval typically comes within a few business days, and you fund the account by linking a bank account and transferring money in.
How Withdrawals Work
Roth IRA withdrawals follow a specific ordering system: contributions come out first, then conversions, then earnings.6Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs That ordering is what makes the account flexible for a young saver.
Your child can withdraw their original contributions at any age, for any reason, without taxes or penalties. If you contribute $3,000 a year from ages 14 to 18, the $15,000 in contributions is available at age 22 with no tax bill. What comes out penalty-free is limited to what went in, not the investment gains on top.
Earnings work differently. To pull them out completely tax-free, two conditions have to be met: the account must have been open at least five years (counting from January 1 of the year of the first contribution), and the account holder must be 59½, permanently disabled, or deceased. Taking earnings out before both are satisfied means paying income tax on the gains plus a 10% early withdrawal penalty.
Penalty Exceptions for Earnings
Two exceptions matter most for young account holders. Earnings used for qualified higher education expenses — tuition, fees, books, supplies, and required equipment at an eligible institution — avoid the 10% penalty, though income tax on the earnings still applies. Up to $10,000 in earnings can also come out penalty-free for a first-time home purchase, with income tax still owed unless the five-year rule is also satisfied.7Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
Because contributions come out first, most young adults never touch the earnings layer. That’s the ideal outcome: the gains stay invested and keep compounding.
Does Your Child Have to File Taxes?
Opening a Roth IRA doesn’t trigger a filing requirement, but earning the income that funds it might. The rules depend on how the money was earned.
A self-employed child — mowing lawns, babysitting, selling online — with net earnings of $400 or more owes self-employment tax (Social Security and Medicare) and has to file a return with Schedule SE, no matter their age.8Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The IRS is explicit that age doesn’t matter for this threshold.9Internal Revenue Service. What Every Student Should Know About Summer Jobs and Taxes Self-employment tax runs about 15.3% of net earnings.
The threshold for W-2 wages is much higher. A dependent child with only earned income generally doesn’t need to file until wages exceed the standard deduction, which is $16,100 for a single filer in 2026.10Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill Most kids with summer jobs fall well below. But if federal income tax was withheld from a paycheck, filing is the only way to get that money refunded.
Rolling Unused 529 Funds Into the Roth
Starting in 2024, the SECURE 2.0 Act allows unused 529 college savings to be rolled into a Roth IRA for the same beneficiary. This can help when a child gets a scholarship, picks a cheaper school, or simply doesn’t spend everything in the 529. The rules are strict:
- The 529 must have been open for at least 15 years.
- Only contributions (and their earnings) that have been in the 529 for at least five years can be rolled.
- The rollover counts against the beneficiary’s annual IRA limit ($7,500 for 2026), reduced by any other IRA contributions that year.
- The lifetime cap is $35,000 per beneficiary.
These rules come from 26 USC 529(c)(3)(E), added by Section 126 of the SECURE 2.0 Act.11Texas Comptroller. SECURE 2.0 Act Sec. 126 – 529-to-Roth IRA Rollovers The transfer has to be direct trustee-to-trustee; you can’t withdraw the 529 money and redeposit it separately.
What Happens When Your Child Reaches the Age of Majority
Once your child hits the age of majority under your state’s law, the custodial arrangement ends and the account becomes a standard Roth IRA in their name. Most states set that age at 18 or 21, though some allow the transferor to specify a later age (up to 25 in certain states). Your child then controls investment decisions, contributions, and withdrawals without your approval.
The mechanics are simple. The custodian contacts the brokerage to re-register the account in the child’s name alone, and assets usually transfer in-kind so nothing has to be sold. Some firms handle it through an online form; others require a phone call. The process generally wraps up within a week.
The handoff is worth a conversation before it happens. Your child will inherit an account potentially worth far more than what was contributed, and how they treat it — continuing to contribute, changing investments, or pulling money out — will shape their finances for decades. The legal transfer is automatic. The financial education to go with it isn’t.