Custodial Roth IRA annual limits for 2023

Forum|Forum|2 years ago
January 7, 2024
1 reply
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I understand I have until April 15, 2024 to contribute to my kids custodial roth IRA. I read that the max contribution is $6500 for 2023 and parents can contribute/match up to what the child earned.

So does that mean if I child earned $6500 annually in earned income for 2023, I can contribute another $6500, for a total for $6500 + $6500 = $13,000 in 2023? Or does that just mean the MAXIMUM contribution total of child's earned income + parents contribution = $6500?

What is not clear to me is if I pay them to say, walk our dogs or clean the house, if that counts as earned income. Or does it have to be a neighbor paying them to walk their dogs or do chores? Do parent's paying their own kids in case, to do things count as earned income?

Bsch4477

Level 15

The maximum contribution is $6,500 or the child’s earned income, whichever is less. It doesn’t matter who funds the IRA within those limits. For example, if the child earned the $6,500 limit, the parent could use their own money to fund the IRA and let the child keep their earnings.

In terms of considering the child as an employee so that the child has earned income, that is problematic unless the child is able to do “real work “ and can actually be considered an employee.

jyeh74Author

Level 6

So the grey answer is, whether or not a parent can pay their child to do chores. Some

people say it’s counted as earned income and keep a log of the activities and payment. But if a neighbor pays my child cash for walking the dog, that is fine? It shouldn’t matter if cash comes from neighbor or parent. Teaching a child payment for work is a good thing either way.