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 Dear Tax Talk:
I have a newborn daughter, and would like to know
if there is any reason I could not contribute
money to a traditional IRA for her, consistent
with both my wife's and my contributions for the
year.
-- Tracy
 Dear
Tracy,
If you want to maintain consistency, then your newborn will have to go to work if she wants to make an IRA contribution. Since she probably won't find work for many years, then a traditional IRA is probably not right for her.
Among other requirements, individuals,
including your dependents, can only contribute
to a traditional or Roth IRA if they have taxable
compensation. Generally, compensation is what
you earn from working either as an employee or
as a self-employed individual. (Not that it matters
to your newborn, but in the interest of others
who may read this, alimony also qualifies as compensation.)
The more appropriate vehicle for a newborn would be a Coverdell Education Savings Account, or what we used to call an educational IRA. Any individual can contribute to a Coverdell ESA if the individual's modified adjusted gross income for the year is less than $110,000. For individuals filing joint returns, that amount is $220,000.
The maximum that can be contributed
annually for one child is $2,000. That amount
can be contributed by anyone, including the child,
parents or grandparents. You can contribute the
maximum to a Coverdell and a qualified tuition
program, such as a Section 529 plan, without penalty.
You can set up a Coverdell with a bank or broker,
just as you would with an IRA.
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