Yes, you can open a Roth IRA for a minor, but the child must have earned income

A minor can hold a Roth IRA, but there is one hard requirement: the child must have earned money from work during that tax year. The earnings can come from a job, self-employment, modeling, acting, or any other work where the child received a W-2 or 1099 form. The contribution limit for the year cannot exceed the total amount the child earned — so a 14-year-old who made $2,000 mowing lawns can contribute up to $2,000 to a Roth IRA, not more.

A parent or guardian opens and manages the account on the child's behalf using a custodial Roth IRA. The parent controls the money until the child reaches the age of majority (18 or 21, depending on your state). At that point, the account transfers to the child's full control. The child's Social Security number goes on the account, and the earnings grow tax-free as long as the account stays open until the child is 59½ and has held the account for at least five years.

Key Takeaways

  • A child must have earned income from work to open a Roth IRA; the contribution cannot exceed what they earned that year.
  • A parent or guardian opens a custodial Roth IRA and manages it until the child reaches the age of majority in their state.
  • Most banks and brokerages offer custodial Roth IRAs, though some have minimum deposit requirements or age restrictions on the child.
  • Money withdrawn before age 59½ is subject to taxes and penalties unless the account has been open for five years and the withdrawal meets a narrow exception.
  • A child can work for a parent's business and earn income that funds a Roth IRA, as long as the work is real and the pay is reasonable.

Where to open a custodial Roth IRA

Most major banks and brokerages allow you to open a custodial Roth IRA. Common providers include Fidelity, Vanguard, Charles Schwab, and Merrill Edge. Each has its own forms and requirements, so you will need to contact the provider directly or visit their website to start the process.

Some providers have a minimum deposit requirement — often $500 to $1,000 — before the account opens. A few have age minimums for the child, typically age 13 or older, though this varies. Call ahead or check the provider's website to confirm they accept custodial accounts and what their specific rules are. You will need the child's Social Security number and your own identification to open the account.

What documents you need to open the account

You will need proof of the child's earned income for the year. This is usually a W-2 form (if the child worked for an employer) or a 1099 form (if the child was self-employed or did contract work). If the child works for your own business, you will need documentation showing the work was performed and the pay was reasonable for the job — a simple record of hours worked and hourly rate is usually enough.

You will also need the child's Social Security number and a government-issued ID for yourself as the custodian. Some providers ask for proof of the parent-child relationship, such as a birth certificate. The brokerage will provide the specific forms to complete; most can be done online or by mail.

How much can be contributed each year

The annual contribution limit for 2024 is $7,000 for anyone under age 50, but the child's contribution cannot exceed their earned income for that year. If a 12-year-old earned $1,500 from a summer job, the maximum contribution is $1,500, not $7,000. If the child earned $10,000, the maximum is still $7,000 (the annual limit), not $10,000.

The contribution must be made by the tax filing deadline for that year, usually April 15 of the following year. You can contribute money from your own pocket — the child does not have to hand over their paycheck — but the contribution amount is capped at what they earned. Contributions made after the deadline count toward the following year's limit.

How a child can earn income through a parent's business

A child can work for a parent's sole proprietorship or family business and earn income that funds a Roth IRA. The work must be real — actual hours spent doing actual tasks — and the pay must be reasonable for the work performed. The IRS scrutinizes this arrangement, so keep records: a simple log of dates, hours worked, tasks completed, and hourly rate paid.

Pay the child by check or bank transfer, and keep that record. If your business is a sole proprietorship, you do not need to file separate payroll forms, but you should document the arrangement in case of an audit. If the child is under 18 and works for a parent's sole proprietorship, there are no federal payroll taxes owed, which makes this a tax-efficient way to fund a Roth IRA. Consult a tax professional if you are unsure whether your arrangement will hold up to scrutiny.

What happens to the money before the child turns 59½

Money withdrawn from a Roth IRA before age 59½ is normally subject to income tax and a 10% penalty on the earnings portion. However, there are narrow exceptions: the child can withdraw contributions (not earnings) at any time without penalty, and earnings can be withdrawn penalty-free if the account has been open for at least five years and the withdrawal is for a first-time home purchase (up to $10,000 lifetime) or certain disability or medical expenses.

The account is meant to sit untouched until retirement. If the child needs the money before then, withdrawing earnings will trigger taxes and penalties. The contribution portion can always come out without penalty, but most families open these accounts specifically to let the money grow for decades, which is where the real tax advantage lies.

Tax implications and reporting

The child does not owe taxes on the money inside the Roth IRA as it grows. When the child eventually withdraws money in retirement (after age 59½ and once the account has been open five years), those withdrawals are tax-free. The parent does not report the Roth IRA on their own tax return; the account belongs to the child and uses the child's Social Security number.

The child may need to file their own tax return for the year they earned the income, depending on how much they made. The brokerage will send tax forms (usually a 1099 or similar) to the child and the IRS each year. If you are unsure whether a tax return is required, consult a tax professional or check the IRS website for that year's filing requirements.

Frequently Asked Questions

Can I contribute to my child's Roth IRA if they did not earn income?

No. The contribution must not exceed the child's earned income for that year. If the child had no income, no contribution can be made. The child must have actual earnings from work — a job, self-employment, or work for a family business — to fund the account.

What happens to the Roth IRA when my child turns 18 or 21?

The account transfers to the child's full control at the age of majority in your state (usually 18 or 21). You will no longer manage it. The child can then make their own decisions about contributions, withdrawals, and investments, though the account rules remain the same — no penalty-free withdrawals before 59½ except for specific exceptions.

Can my child have both a Roth IRA and a regular job?

Yes. The child can work a regular job and also work for your family business. The total earned income from all sources is what counts toward the contribution limit. If the child earned $3,000 from a part-time job and $2,000 from your business, the total earned income is $5,000, and that is the maximum contribution for the year.

What if my child's income varies year to year?

Contributions are based on that year's earnings only. If your child earned $4,000 one year and $1,000 the next, you can contribute up to $4,000 in the first year and up to $1,000 in the second year. There is no requirement to contribute the maximum each year — you can contribute less or skip a year if income is low.