See this IRS website https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-li...
For 2015, 2016, and 2017, your total contributions to all of your
traditional
and
Roth IRAs
cannot be more than:
-
$5,500 ($6,500 if you’re age 50 or older), or
- your taxable compensation for the year, if your compensation was less than this dollar limit.
An allowence is not taxable compensation. If the child does not have taxable compensation then they cannot contribute to an IRA.
See this IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) - https://www.irs.gov/publications/p590a/ch01.html#en_US_2016_publink1000230355
Generally, compensation is what you earn from working. For a summary of what compensation does and does not include, see
Table 1-1
. Compensation includes all of the items discussed next (even if you have more than one type).
Wages, salaries, etc. Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.
Commissions. An amount you receive that is a percentage of profits or sales price is compensation.
Self-employment income. If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of:
The deduction for contributions made on your behalf to retirement plans, and
The deduction allowed for the deductible part of your self-employment taxes.
