If a grandparent contributed money in an IRA for his/her grandchild, is that deductible?
Announcement
Collapse
No announcement yet.
IRA's for Grandchildren deductible?
Collapse
X
-
IRAs for young children
For all except the super-rich, a Traditional IRA for a young child doesn't make sense.
A Roth IRA makes sense. Or a Coverdell ESA.
Yes, there's always some crazy exception that someone will think of. A ten-year old from a working class family might somehow land a contract to do a few TV commercials or newspaper ads, and if a ten-year old has $6500 in earned income, and no personal exemption ('cause he's still a dependent), then I suppose maybe a Traditional IRA makes sense, to the extent that it may reduce the kid's taxable income down to zero.
But most young children have zero earned income, and they can't contribute to any type of IRA. Those young children that have some earned income will probably have zero taxable income even without an IRA deduction.
Therefore, a Roth IRA or Coverdell contribution makes a lot more sense.
FYI: Kiddie tax is not applicable to earned income; it's applicable to investment income.Burton M. Koss
koss@usakoss.net
____________________________________
The map is not the territory...
and the instruction book is not the process.
Comment
Disclaimer
Collapse
This message board allows participants to freely exchange ideas and opinions on areas concerning taxes. The comments posted are the opinions of participants and not that of Tax Materials, Inc. We make no claim as to the accuracy of the information and will not be held liable for any damages caused by using such information. Tax Materials, Inc. reserves the right to delete or modify inappropriate postings.
Comment