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Can my spouse contribute to an IRA if they don't work?

Spousal IRAs

The single wage earner family is at a severe disadvantage when it comes to saving for retirement. Even if one spouse earns a high salary and makes the maximum contribution to their 401k and IRA, the deferral limits under IRA’s and other tax deferred programs make it difficult to save sufficiently for both partners. Congress created the Spousal IRA to allow married couples with a single wage earner that same IRA contribution opportunities as married couples with two wage earners.  The Spousal IRA is not allowed if you file separately from your spouse or if you file as head of household.

The IRS says that you and your spouse can both make IRA contributions even if only one of you has taxable compensation. The amount of your combined IRA contributions can't exceed the income on your joint tax return. If you didn't participate in a retirement plan through your employer, all of the IRA contributions you and your wife make are tax deductible if you file a joint tax return.  The maximum contribution is $5,500 annually and can be made as late as the day you file your tax return.  Beginning age 50, you can contribute at additional $1,000 annually to your IRA or Roth IRA.  IRA contributions cannot exceed your taxable compensation.

Spousal Roth IRAs

You can also choose to fund your spouse's Roth IRA in lieu of a traditional IRA.  You do not get any tax deduction on a Roth IRA but the potential investment growth and earnings grow tax-free and can be withdrawn tax-free if the contributions were made over 5 years ago.

Deduction Limitations

If you are eligible for a retirement plan at work, the IRA contributions you and your spouse make might not be tax deductible if you have high income. According to the IRS at the time of publication, you can't deduct IRA contributions for a joint tax return if you make $115,000 or more in a year and you have a retirement plan through your employer. The IRA tax deduction begins to phase out if you make over $95,000.  If your spouse doesn't work and you have a retirement plan through your employer, your spouse cannot deduct IRA contributions if your adjusted gross income is $188,000 or more and it begins to phase out at $178,000. 

Non-Deductible IRAs

If your income is above the tax deductible income thresholds, you can make non-deductible traditional IRA contributions.  Your non-deductible IRA would have a cost basis and benefit from tax deferral.  The gains of the IRA that are withdrawn during retirement will be subject to ordinary income taxes.




This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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