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Reply to "Funding Roth IRA for minor children"
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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Did your child file taxes? If he only earned $1000 for the year, the Roth IRA can only be funded $1000.[/quote] You can pad this with another $400 that would be income like baby sitting that they don't need to pay payroll taxes on.[/quote] No, you can’t. There is no “padding” or “would be income.” [/quote] This is not entirely true. DH and I opened Roth IRAs two years ago for our now 17 year old DD. We’ve contributed the max each year ($6K last year) and will have put in $6.5K this year. The only real requirement is that DD needs to have at least that much or more in earned income for the year. This is no problem, since she “earns” $7K in household chores and errands. As long as you file a tax return that claims this much in income, you’re good. Best to keep the alleged income low enough to avoid state and federal taxes, of course. Also, nothing stops you from opening such a Roth IRA and basically using it for yourself as a tax shelter for speculative investing and then withdrawing contributions later for whatever. Profits stay behind and can be pulled to help pay for college, first home, etc….[/quote] BTW, this is a neat trick, put pales in comparison to the one in which DH and I both have HDHP plans, both have HSAs, and both contribute the family max to each of our HSA accounts. Our entire family is double insured (at employer cost), but also we’re capitalizing on double the triple tax benefit offered by HSAs. That’s a nearly $15K pre-tax deduction for families with two working parents! Gotta take advantage of the extra breaks when possible. [/quote] You can’t get a tax break on the amount over the family limit. There is no double family limit, this will come back out at tax time.[/quote] +1. The max is ~7.3k for the combined family. You cannot both contribute ~7k. https://www.peoplekeep.com/blog/how-hsa-contribution-limits-work-for-spouses PP, do you file separate taxes?[/quote] The family max is $7,300 [b]per[/b] HDHP. If a family has multiple HDHPs, then each HDHP can have its own HSA, each of which has its own limit per IRS rules. In theory, a family of 5 could have 5 HDHP plans and associated HSAs and have a total of $36,500 in tax sheltered HSA savings. This is a very little known loophole in the tax code that most overlook, thinking that there is no value in signing up for otherwise duplicative insurance plans. We’ve been taking advantage of this since 2017 and have about $180K in our various HSAs as a result. [/quote]
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