Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Can a child who's only earned income is from odd jobs- ie babysitting, lawn mowing, etc. contribute to a Roth IRA?

Yes, but there is a catch. In order to contribute the full $2000 to the Roth, the child would have to declare at least that amount as self employment income and pay SE tax at 15.3%.

Assuming $2000 as SE income, the SE tax would around $283. Income tax would be negated by the standard deduction (assuming other taxable income is less than $2,500). This also assumes that the child is claimed as a dependent on the parent's return.

It works out much better for children who have regular wages from part-time jobs because SE taxes are not an issue. A child could earn up to $4,500 and pay FICA through withholding at 7.65% and remain tax-exempt for Federal purposes (state taxes may be applicable though). The child can then make a Roth contribution to the lesser of their earned income or $2,000.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.