Can my kid open a Roth IRA with business income?

Yes, and it is probably the most valuable thing on this entire site.

The requirement is earned income, and self-employment income counts. Mowing lawns, babysitting, and pet sitting all qualify. A kid with no job but a lawn route is eligible.

It works as a custodial Roth IRA. You are the custodian, the money belongs to your kid outright rather than to you, and control transfers at your state's age of termination, usually 18 or 21 and as late as 25 in some states. Most of the large brokerages offer these and you should not be paying a recurring custodial fee.

The contribution limit is the lesser of your kid's earned income for the year or $7,500 for 2026, up from $7,000 in 2025. Earned income is almost always the binding number. A kid who earned $2,000 can contribute $2,000, not $7,500.

The part families miss: the money does not have to come from the kid. Anyone can fund it. You can match what they put in, or contribute the whole amount as a reward for the work, as long as the total never exceeds what they actually earned. That turns a Roth into something a kid will actually agree to, because handing over their own summer earnings is a hard sell at fourteen.

Keep documentation. The IRS expects proof the income was real, which means a log, invoices, or a Schedule C. This is the practical reason filing a return on a small amount is worth doing rather than avoiding.

Why it matters more than the numbers suggest: contributions go in during years when a kid's income is low enough to owe little or no income tax, and then grow tax free for forty or fifty years. Small amounts at fourteen behave very differently from small amounts at forty.

One thing to be clear eyed about. At the age of termination the account is entirely theirs and they can empty it. Worth knowing before you fund it heavily.

Figures are for the 2026 tax year and were checked in September 2026. Limits change most years, and this is not tax or investment advice.