Yes, you can open an IRA for your child at any age, as long as the child has earned income from actual work. The account is a custodial IRA: your child owns it, you manage the investments and paperwork, and control transfers to them at the age of majority. For 2026, contributions are capped at $7,500 or the amount your child actually earned that year, whichever is less.1Internal Revenue Service. Retirement Topics – IRA Contribution Limits Most families use a Roth version, because a child’s low income means money goes in with little or no tax and then grows tax-free for decades.
The Earned Income Requirement
The one rule you can’t work around is earned income. The IRS defines this as compensation from actual work: wages from an employer, tips, or net self-employment earnings from activities like tutoring, babysitting, mowing lawns, or selling crafts. Gifts, allowance money, savings account interest, and investment dividends don’t count.2Internal Revenue Service. Topic No. 451, Individual Retirement Arrangements (IRAs)
The pay also has to be reasonable for the work. Paying your eight-year-old $50 an hour to sweep the garage will raise red flags. If your child works for an outside employer, the W-2 handles documentation. For self-employment income, keep a simple log with the date, the task, the hours, and the amount paid. Hold onto those records for at least three years from the date you file the return, which covers the standard period the IRS can request verification.3Internal Revenue Service. How Long Should I Keep Records
The Money Doesn’t Have to Come From the Child
A detail many parents miss: the actual contribution dollars don’t have to come out of your child’s bank account. If your teenager earned $3,000 over the summer and spent all of it, you can still deposit up to $3,000 into their IRA from your own funds. The IRS cares that the child had $3,000 in earned income, not whose checking account the deposit came from. For most families, this falls well within the annual gift tax exclusion.
Roth or Traditional
A Roth IRA is almost always the right choice for a child. Roth contributions go in with after-tax dollars, but most kids earn well below the standard deduction ($16,100 for a single filer in 2026), so they owe little or no federal income tax on that money anyway.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 From there the account grows tax-free, and qualified withdrawals come out tax-free decades later.5Internal Revenue Service. Roth IRAs
A traditional IRA lets you deduct contributions now and pay taxes on withdrawal.6Internal Revenue Service. Traditional and Roth IRAs That trade works for a high-earning adult in a steep bracket. For a child who likely owes zero tax today, there is no deduction worth capturing, and the traditional IRA’s main advantage disappears.
Contribution Limits and Deadlines
For 2026, the IRA contribution ceiling is $7,500 for anyone under 50.1Internal Revenue Service. Retirement Topics – IRA Contribution Limits For most children, the real cap is their total earned income for the year, because contributions can never exceed what the child actually made. If your daughter earned $2,400 babysitting, the maximum you can put in is $2,400. The $7,500 federal figure is irrelevant.
You have until the tax filing deadline to make contributions for a given year, so contributions for 2026 can go in anytime up to April 15, 2027.7Internal Revenue Service. IRA Year-End Reminders That gives you a few extra months to tally earnings and settle on the right amount.
If you accidentally contribute more than your child earned, the excess gets hit with a 6% excise tax for every year it stays in the account.8Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities The fix is to withdraw the excess, along with any earnings on it, before the filing deadline. Do that and the penalty doesn’t apply.
How to Open the Account
Most major brokerage firms offer custodial Roth IRAs online, and the application takes about 15 minutes. You’ll need:
- For the child: full legal name, Social Security number, and date of birth.
- For you as custodian: Social Security number, physical address, government-issued ID, employment status, and annual income.
- Proof of the child’s earnings: a W-2 if there’s a formal employer, or a self-employment ledger for freelance work. The brokerage may not ask up front, but the IRS can, so keep it on hand.
Once the application goes through, link a bank account to fund the first deposit. Most firms confirm the account within a few business days, and you can begin investing right after funding.
Getting Money Back Out
Part of what makes a Roth IRA work so well for a child is its withdrawal flexibility. The contributions themselves (the money you put in, not the investment gains) can be pulled out at any time, at any age, with no taxes and no penalty. The IRS treats Roth withdrawals as coming from contributions first.5Internal Revenue Service. Roth IRAs If your child contributed $15,000 over the years and the account grew to $22,000, they could withdraw up to $15,000 without owing anything.
Earnings are different. Pulling investment gains out before age 59½ generally triggers income tax plus a 10% early withdrawal penalty. Two exceptions line up with milestones a young person is likely to hit:
- Qualified higher education expenses, such as tuition and fees, let the child withdraw earnings penalty-free, though the earnings may still be subject to income tax if the account hasn’t satisfied the five-year rule.9Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions from Traditional and Roth IRAs
- A first home purchase allows up to $10,000 of earnings to come out penalty-free.9Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions from Traditional and Roth IRAs
The five-year clock for tax-free earnings starts on January 1 of the year the first contribution is made. Opening an account for a 12-year-old means the five-year test is already satisfied by age 17.
Does Your Child Need to File a Tax Return
Roth IRA contributions themselves don’t get reported on your child’s tax return.10Internal Revenue Service. Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) Whether a return is required depends on earnings. For 2026, a dependent with only earned income generally doesn’t need to file unless that income tops $16,100.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Most part-time jobs stay well below that.
Filing is still worth doing when a child had taxes withheld from a paycheck, because that’s the only way to get the withholding refunded. And if your child has net self-employment earnings over $400, a return is required regardless of the standard deduction, since self-employment tax applies separately.
How It Affects Financial Aid
A custodial Roth IRA has a real advantage over a regular custodial brokerage account for college aid. Retirement accounts aren’t reported as assets on the FAFSA, so the balance in the Roth IRA doesn’t count against your child when the Student Aid Index is calculated. A regular custodial brokerage account, by contrast, is treated as a student asset and assessed at 20%.
The catch is distributions. Withdrawals from the Roth IRA show up as income on a later FAFSA, which can reduce aid in a subsequent year. If your child plans to tap the account during college, time the withdrawal for after the last FAFSA has been filed.
When Your Child Takes Over
The custodial arrangement has an end date. When your child reaches the age of majority under your state’s law, the brokerage converts the account into a standard IRA in your child’s name and they gain full control. In most states that happens at 18 or 21, depending on how the account was set up and which state’s version of the Uniform Transfers to Minors Act applies. A few states let the person who opened the account specify a later handoff, sometimes as late as 25.
Full control is literal: once the transfer happens, your child can change investments, take withdrawals, or close the account, and you have no legal authority to stop them.