In order to be able to contribute to an IRA, a person (or their spouse) needs to have earned income. Since your kids have no earned income, they aren't eligible for an IRA right now.

Many of your colleagues who either moonlight or do some consulting pay their children for services they perform during the year. Your kids are still young, but in a few years they will be able to help you with filing and other light office duties. Money paid to them reduces your taxable income, is not taxable to them (up to certain limits), and allows them to contribute to an IRA or Roth IRA. Beware of the paperwork, however, since you will need to file all the forms required by businesses with employees in your state.

One alternative is to contribute to a 529 plan on behalf of your children. While amounts contributed are not tax deductible, they grow tax deferred under the current rules.

Zip Code: aschwartz@mdtaxes.com

You can setup an education IRA (ESA) for your children under the age of 18. The income in the IRA is tax-free if spent on qualified education expenses prior to age 30. Qualified education expense include private elementary and secondary schooling, and college expenses.

The maximum annual contribution is $2,000 per child, there are ways around this limitation. Contributions to an ESA are limted to taxpayers with income below a certain threshold, again there are ways around this limitation.

ESA's allow the you to buy and sell almost any type of investment, wheras Sec 529 plans you are limited to mutual funds and the changes in strategy. This allows the freedom to speculate with any gains completly taxfree regardless of holding period.

Zip Code: miketyler@thecia.net