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IRA's for Grandchildren deductible?

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    IRA's for Grandchildren deductible?

    If a grandparent contributed money in an IRA for his/her grandchild, is that deductible?

    #2
    To the grandchild

    To the grandchild whose SS# is on the account. Make sure the grandchild had enough earned income to make an IRA contribution (and not too much to prevent, say, a Roth).

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      #3
      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.

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