Whether you are a stay-at-home parent or just taking some time off from work, that doesn’t mean you should take a break from saving for retirement. Did you know that a non-working spouse can make a tax deductible IRA contribution of up to $6,500 ($5,500 if under age 50)? There are only a few eligibility requirements for a non-working spouse to comply with to contribute to a spousal IRA.
The eligibility requirements for the spousal IRA are straightforward:
- Marital Status: Married
- Tax Filing Status: Married, filing jointly
- Earnings: Contributing spouse must have compensation/earned income that amounts to at least the amount annually contributed to the non-working spouse’s IRA. If the contributing spouse also has an IRA, annual compensation/earned income must exceed the combined contributions of the IRAs.
- Age: The non-working spouse must be under age 70 ½ during the year the contribution is made for a traditional IRA. There are no age restrictions on a Roth IRA for a non-working spouse.
Whether or not the contribution is tax deductible is dependent on the account type and the income of the working spouse as well as whether the working spouse is covered by a qualified retirement plan at work. For non-Roth IRAs, if the spouse is covered by an employer retirement plan, a full deduction can be taken as long as the modified adjusted gross income (AGI) of the married partners does not exceed $183,000. If the combined AGI is over $193,000, no deduction can be taken. Anything in between $183,000-$193,000, deductions are phased out so partial deductions can be taken.
As always, it is best to consult with your tax advisor when determining how certain transactions affect your tax status. If you’re interested in setting up your spousal IRA, please contact Midland IRA At 239-333-1032.
Written by Brandon Hall, MBA, CISP, Director of IRA Operations, Midland IRA, Fort Myers, FL, 239-333-4912.