Kids & Earned Income: IRS Basics

"Earned income" is the magic phrase behind every Roth IRA for a minor. It's the tax concept that decides whether your child can contribute, and how much. The good news: for a kid selling art, the rules are simpler than they look.

Earned vs. unearned income

The IRS sorts income into two buckets:

• Earned income — money you work for. Wages, salary, tips, and net self-employment income all count. This is the income that qualifies a child for an IRA contribution.
• Unearned income — money that comes from something other than work. Interest, dividends, capital gains, and gifts fall here. It does not qualify for an IRA contribution.

Allowance, birthday checks, and lawn-mowing money paid by you (without a real business relationship) generally don't count as earned income for IRA purposes. Sales to real customers do.

Selling art is self-employment

When your child sells digital art to buyers, the IRS sees a sole proprietor. The number that matters is net profit:

Business expenses can include art supplies, drawing software subscriptions, a portion of a printer or tablet, shipping, and platform or payment fees. Keep receipts — they lower the income that's taxable and they don't reduce how much can go into a Roth (the Roth limit is based on gross earned income before deductions, up to the annual cap).

The $400 threshold and self-employment tax

Self-employment income has a lower filing trigger than most people expect. Once net earnings reach $400 for the year, your child generally needs to file a federal return and pay self-employment tax — the child's share of Social Security and Medicare.

This surprises parents, but it's the trade-off for getting "credit" for the work with Social Security. It's also the reason a simple art side-hustle can produce a tax return even when no income tax is owed.

Does my child actually owe income tax?

Usually not much, if anything. A dependent's standard deduction generally shelters their earned income up to a threshold, so a child earning a few hundred to a few thousand dollars often owes zero federal income tax — even though a return may still be required for self-employment tax.

Two related rules worth knowing:

• The kiddie tax taxes a child's unearned income (like investment gains) at the parents' rate above a small threshold. It does not apply to the earned income that funds a Roth IRA.
• State rules differ. Your state may have its own filing thresholds and forms.

The forms you may touch

• Form 1040 — the child's individual return.
• Schedule C — reports the art business's income and expenses.
• Schedule SE — calculates self-employment tax.
• Form 1099-K / 1099-NEC — payment platforms and clients may issue these above certain reporting thresholds. Those thresholds have changed in recent years, so confirm the current rule rather than assuming a number.

Documentation to keep

• A year-end earnings summary (Art4IRA provides one).
• A simple ledger of sales: date, item, amount.
• Receipts for supplies, software, and fees.
• Any 1099s received.
• A copy of the filed return, if one was needed.

Keep these with the child's tax records. They're both the audit trail and the proof of earned income behind a Roth contribution.

From earned income to a Roth IRA

Once you can state your child's earned income with confidence, the contribution is straightforward: put in up to that amount, capped at the annual limit ($7,500 for 2026), by the filing deadline. For the full walkthrough — opening the account, funding it, and the mistakes to avoid — read The Custodial Roth IRA Playbook.

This guide is educational and does not constitute tax, legal, or investment advice. Rules, thresholds, and forms are set by the IRS and can change; verify current requirements at irs.gov or with a qualified tax professional. Art4IRA is not a registered investment advisor.