By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.
A child of any age can have a custodial Roth IRA, as long as the child has earned income from real work. For 2026, the most that can go in is the lesser of the child’s earned income for the year or $7,500. A parent opens and runs the account as custodian, and the parent can even supply the dollars, but the contribution can never exceed what the child actually earned.
For a high-income family, the hard part is not the account. It is the earned income. Most children under 12 have none, and the ones who do usually have a small, specific source: babysitting for neighbors, a paid commercial shoot, or real work in a parent’s business. This guide covers what counts, how much can go in, a worked example over 50 years, how a custodial Roth compares with a 529 and a UTMA for the same dollars, and the records that make the contribution hold up.
Can a child have a Roth IRA? The rule is earned income, not age
There is no minimum age. IRS Publication 590-A says contributions “can be made to your Roth IRA regardless of your age” (IRS Pub. 590-A). What there is, is a compensation test. The annual Roth IRA limit is the smaller of the dollar limit ($7,500 for 2026 under IRS Notice 2025-67) or the account owner’s taxable compensation for the year (IRC sections 219(b)(1) and 408A(c)(2)).
Because a minor cannot sign a brokerage contract, the account is opened as a custodial (sometimes called “minor”) Roth IRA. The child owns it. A parent or other adult acts as custodian, makes the investment decisions, and hands control to the child at the age set by state law and the provider’s account agreement.
One point surprises many of the families we work with. Your household income does not matter here. A married couple earning $900,000 is far above the 2026 Roth IRA income phase-out of $242,000 to $252,000 for joint filers, but the test for the child’s account uses the child’s own income, not yours. A child with $3,000 of earnings is well inside the limit. (For the parents’ own retirement accounts, including the backdoor and mega backdoor Roth, see our retirement and employee benefits hub.)
What counts as earned income for a child under 12 (and what the IRS rejects)
Compensation for IRA purposes means pay for personal services: wages shown in box 1 of a Form W-2, and net earnings from self-employment (Pub. 590-A, “What Is Compensation?”). Investment income never counts. That rules out most of what a young child in a well-off family receives.
Income that usually holds up
- Babysitting, pet sitting, or yard work for neighbors. Paid by someone outside the household, at a going rate, for work actually done.
- Paid acting, modeling, or voice work. Common for children in Los Angeles and the Bay Area. Production companies typically pay on a W-2, which is the cleanest possible record.
- A real job in a parent’s business at market pay. Filing, product photos, cleaning an office, for hours that are logged and a rate you would pay an unrelated teenager. If the business is a sole proprietorship, or a partnership owned only by the child’s parents, wages to a child under 18 are not subject to Social Security and Medicare taxes (IRS Pub. 15 (2026), “Child employed by parents”).
Income that does not count
- An allowance. It is a transfer, not pay for services.
- Chores you would expect of any child in the family. Making a bed or clearing the table is not a job, whatever you call the money.
- Gifts, including birthday money and grandparent checks.
- Interest, dividends, and capital gains from a UTMA or savings account.
Be honest about where your family lands. For most dual-W-2 households with no business of their own, a child under 12 has no qualifying income, and the right answer is to wait. Paying your own child for household work can technically be wages, but it is the pattern most likely to be questioned: pay that tracks an allowance, no log, and a rate no one outside the family would pay. If you would be uncomfortable explaining the arrangement to an IRS examiner, do not build a Roth contribution on top of it.
How much you can put in for 2026: the lesser of earned income or $7,500
The cap is simple once the income is real. Some quick cases for 2026:
| Child’s 2026 earned income | Maximum Roth IRA contribution | Why |
|---|---|---|
| $0 (allowance and gifts only) | $0 | No compensation |
| $1,200 from pet sitting | $1,200 | Limited to earnings |
| $3,000 from a W-2 commercial shoot | $3,000 | Limited to earnings |
| $9,000 from acting work | $7,500 | Limited to the 2026 IRA limit |
Contributions for a tax year can be made until the due date of the return for that year, not including extensions. For 2026, that is April 15, 2027 (Pub. 590-A). That gives you time to total a year of babysitting or shoot income before deciding the amount.
The child usually owes no federal income tax on it
A child who can be claimed as a dependent gets a standard deduction for 2026 equal to the greater of $1,350 or earned income plus $450, capped at the regular single standard deduction of $16,100 (Rev. Proc. 2025-32, section 4.14). A child who earns $3,000 in wages has a $3,450 standard deduction, so no federal income tax is due. Payroll taxes are separate: W-2 pay from an outside employer will usually have Social Security and Medicare withheld, and a child with net self-employment earnings of $400 or more must file a return (IRS Pub. 501).
Parents can fund it: giving the contribution without breaking the rules
The contribution does not have to come from the child’s own paycheck. The earned income sets the ceiling, and the dollars can come from anywhere. A common pattern: the child keeps or spends what they earned, and the parents give an equal amount, which goes into the Roth.
That gift counts toward the federal gift tax annual exclusion, which is $19,000 per giver per recipient for 2026 (Rev. Proc. 2025-32). A Roth contribution can never exceed $7,500 for 2026, so a gift to fund it stays well inside one parent’s exclusion. Grandparents can fund it the same way, as long as total contributions from everyone stay within the child’s earned income.
What you cannot do is give the child money and call the gift earned income. The gift funds the contribution. The work creates the room.
Worked example: $3,000 a year from age 9 to 18, left alone until 60
Priya and Daniel live in San Jose. He is a physician, she works at a biotech company, and their household income is about $900,000. Their daughter Lena, 9, books two or three commercial shoots a year and receives a W-2 for about $3,000 each year. Lena puts her pay in a regular savings account. Each year, her parents give her $3,000, which goes into her custodial Roth IRA.
Assumptions (illustrative, not a forecast): $3,000 contributed at the end of each year from age 9 through 18 (10 contributions, $30,000 total); a 7% average annual nominal return; no withdrawals; no fees; no further contributions after 18. Real returns vary year to year and can be negative. This is not a promise of any result.
| Lena’s age | Total contributed | Account value at 7% |
|---|---|---|
| 18 | $30,000 | about $41,400 |
| 30 | $30,000 | about $93,400 |
| 40 | $30,000 | about $183,600 |
| 50 | $30,000 | about $361,200 |
| 60 | $30,000 | about $710,600 |
What the numbers mean for this family:
- Lena’s tax: $0 federal income tax for 2026, because her 2026 dependent standard deduction ($3,000 plus $450, so $3,450) is more than her pay, assuming she has no other income. Later years work the same way while her pay stays under the deduction. Social Security and Medicare are withheld by the production company.
- Her parents’ tax: no deduction and no Form 709. Each $3,000 gift is far under the $19,000 annual exclusion for 2026.
- At 60: if the account meets the qualified distribution rules, the roughly $680,000 of growth comes out free of federal income tax (IRS Pub. 590-B).
Compare that with the same $3,000 a year in a taxable account in Lena’s name. Dividends and gains there are her unearned income. For 2026, while she is under 18 (and in some cases up to 23), unearned income above $2,700 a year is taxed at her parents’ rates under the kiddie tax (Rev. Proc. 2025-32; Form 8615 instructions). Assuming Priya and Daniel’s 2026 taxable income is above $768,700, that means 37% federal on interest and short-term gains and 20% on qualified dividends and long-term gains. Otherwise it is taxed to Lena as realized. The Roth avoids tax on the growth. The trade-off is less flexibility on the growth.
Opening and running a custodial Roth IRA
- Confirm the income first. Have the W-2, 1099, or log in hand before opening anything.
- Pick a provider that offers custodial Roth IRAs. Not every brokerage does. You will need the child’s Social Security number and date of birth, and the custodian’s own identification.
- Name the custodian and a successor. If the custodian dies or cannot act, the account agreement decides who takes over. Name someone on purpose.
- Choose simple investments. The horizon is 40 to 50 years. A low-cost, broadly diversified stock index fund is a common choice for a horizon this long. Money left in cash for decades can give up much of the growth the account exists for.
- Contribute by the deadline. April 15 of the following year, with no extension.
When the child takes control
The custodian controls the account until the child reaches the age set by state law and the provider’s agreement, typically 18 or 21. For reference, California’s UTMA transfers at 18 by default, with a lifetime gift able to delay transfer to no later than 21 (Cal. Probate Code section 3920.5). In Washington, UTMA transfers by gift end at 21 (RCW 11.114.200). Read your provider’s custodial IRA agreement for the exact age it applies. After that date, the money is legally your child’s to use.
What can come out, and when
Roth IRA withdrawals follow ordering rules: the child’s contributions come out first, and they can come out at any time free of tax and penalty. Earnings are tax-free only in a qualified distribution, which generally requires the account to be at least 5 years old and the owner to be 59½ or older, with a few exceptions, including up to $10,000 lifetime for a first home. Qualified higher education expenses are an exception to the 10% additional tax, but earnings taken for them before a qualified distribution are still taxable (Pub. 590-B).
Custodial Roth vs 529 vs UTMA for the same dollars
| Custodial Roth IRA | 529 plan | UTMA account | |
|---|---|---|---|
| Needs the child’s earned income | Yes | No | No |
| How much can go in (2026) | Lesser of earned income or $7,500 | No annual federal limit; gifts over $19,000 per giver use lifetime exclusion or the 5-year election | No limit; gifts over $19,000 per giver use lifetime exclusion |
| Tax on growth | Tax-free if qualified | Tax-free for qualified education costs | Taxable each year; kiddie tax above $2,700 of unearned income (2026) |
| Who controls it | Custodian until 18 or 21, then child | Account owner (usually a parent) indefinitely | Custodian until 18 to 25 depending on state and transfer, then child |
| Best use | Long-term wealth the child owns | Education | Flexible spending for the child |
For most of our families, the order is: fund the 529 for education, add the custodial Roth only in years with real earned income, and use a UTMA sparingly because of the kiddie tax and the loss of control at 18 to 25. California gives no state deduction for 529 contributions (FTB analysis of SB 529). Federal law also allows a lifetime maximum of $35,000 to move from a 529 open more than 15 years into the beneficiary’s Roth IRA, subject to the same annual Roth limit (Pub. 590-A), which makes over-funding a 529 less costly than it used to be. For more on the other two accounts, see our guides to opening a kids’ stock account and UTMA withdrawal tax rules.
Records to keep so the contribution holds up
If the IRS questions a child’s Roth contribution, the question will be whether the income was real. Keep one simple log per child, per year:
| Date | Task | Hours | Pay | Paid by | How paid |
|---|---|---|---|---|---|
| 2026-03-14 | Babysitting, two children | 4 | $80 | Neighbor (name) | Venmo |
| 2026-06-02 | Commercial shoot | 6 | $1,450 | Production company | W-2 payroll |
Alongside the log, keep copies of every W-2 and 1099, bank or payment-app records showing the money reached the child, and the year’s contribution confirmation. If the child had net self-employment earnings of $400 or more, a return is required. If not, some families file one anyway so the income is on record. If you employ your child in your own business, add a short job description and the rate you would pay someone unrelated.
What to write down for your child
A custodial Roth is one of the few accounts your child will own outright, possibly as early as 18. The balance is the smaller part of the gift. The larger part is why it exists.
Write a one-page note and keep it with the account records: what work earned the money, why you chose a Roth over spending it, what you hope the money will and will not be used for, and what you would do at 18 if you were them. As Kevin Luu puts it: “Your kids will inherit your money. Will they inherit your judgment?” In the FamilyKnowledge® Library, this note becomes a Decision Memo your child can read when the account becomes theirs. It is the same idea behind Age Five Wealth Education: the reasoning is worth more than the account.
Common mistakes with custodial Roth IRAs
- Contributing with no earned income. Allowance or gifts alone create an excess contribution, which carries a 6% tax for every year it stays in the account (Pub. 590-A).
- Contributing more than the child earned. $2,000 of babysitting allows $2,000, not $7,500.
- Assuming the parents’ income blocks it. The child’s income is what counts.
- No records. Cash from neighbors with no log is hard to defend years later.
- Leaving the money in cash. A 50-year account invested in a money market fund forgoes most of the point.
- Missing the deadline. A 2026 contribution must be made by April 15, 2027. Extensions do not extend it.
- Forgetting the handover. At 18 or 21 the account is your child’s, whether or not they are ready. The note above is how you prepare them.
Frequently asked questions
Our income is well above the Roth limit. Can our child still have a Roth IRA?
Yes. The 2026 Roth income phase-out ($242,000 to $252,000 for joint filers) applies to the account owner’s own modified AGI. The child owns the custodial Roth, so only the child’s income matters. A child with a few thousand dollars of earnings is far below any phase-out, however much the parents earn.
Can grandparents contribute to a custodial Roth IRA?
Yes. Anyone can supply the dollars, as long as total contributions for the year from everyone do not exceed the lesser of the child’s earned income or $7,500 for 2026. A grandparent’s gift counts toward that grandparent’s own $19,000 annual exclusion for 2026. Coordinate with the custodian so two relatives do not both fund the full amount.
What happens to the account when our child turns 18?
Control passes to the child at the age set by state law and the provider’s agreement, typically 18 or 21. The provider usually re-registers it as an ordinary Roth IRA in the child’s name. From then on, the child decides how to invest it and whether to withdraw. That is why the written note matters more than the balance.
Next step
List every source of earned income each of your children had this year, even small ones, and check it against the “holds up” list above. If there is none, a custodial Roth has to wait, and many families put this year’s dollars toward the 529 instead. If you would like us to look at the custodial Roth alongside your 529s, equity compensation and the rest of your family’s plan, the Age Five Family Office™ team at Bright Advisers does that in the Tax & Wealth Assessment.
This is general education, not individual tax or investment advice. The right move depends on your family’s full picture.