Can My Spouse Contribute to an IRA?

Can My Spouse Contribute to an IRA?

I call it Retirement Limbo. When one spouse is retired and the other is still working those last couple of years. Either waiting to qualify for Medicare, they enjoy their job, or just not quite ready to put their career hat on the shelf. For those years, many taxpayers miss out on an extra deduction that they didn’t know they could have.

This week’s Tax Tip centers on Traditional IRA contributions, specifically for a spouse who isn’t working. Many are familiar with the general rules of IRA contributions: 

  • You have to have “earned income” in order to contribute.
  • The contribution limit each year for those over 50 is $6,500 (as of 2016).
  • Your deduction may be limited if your income exceeds certain limits. Side note, if your employment doesn’t have a retirement plan option (e.g. 401k), then there is no income limitation.

Earned Income Requirement:

What many don’t realize is that the income requirement is satisfied when either you, or your spouse is working. So, if one spouse has already retired, or if one spouse is a stay-at-home-parent, they can contribute to an IRA as long as there is enough earned income to contribute to the account (in this case, over $6,500).

Deduction Limitations from High Income:

The income limitation for file “Married Filing Jointly,” and both taxpayers have retirement plan options at work do not get a deduction for IRA contributions if their MAGI is above $118,000. However, if a spouse is not working, the combine family income can be much higher – $193,000. While $6,500 may not seem like a large amount to invest, for someone who is in higher tax brackets, it could save quite a bit come tax time and can create some extra tax alpha for you in your investment plan.

Of course, IRA contribution rules are subject to change and can be quite complicated, so please either give us or your tax preparer a call to discuss in detail.

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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