Making spousal IRA contributions is an important way to build up your family's retirement nest egg, if only one spouse is employed. People without paid jobs generally aren't eligible to contribute to tax-advantaged retirement accounts, such as IRAs, because they don't have earned income to fund them. However, there is an exception for married, nonworking individuals whose spouses are employed, as long as they both meet certain requirements.
If they do, the couple can make a separate IRA contribution on behalf of a nonworking spouse, or a spouse who has little income, using the income of the employed spouse. These are known as spousal IRA contributions, and here are the rules that apply to them:
- If one spouse has earned income, the family can make IRA contributions for a nonworking spouse.
- Traditional and Roth IRAs have the same contribution limits, but different eligibility requirements based on income.
- Your and your spouse's IRAs must be held separately in each of your names. IRAs cannot be set up as joint accounts.
Eligibility for Spousal IRA Contributions
If you're the employed spouse and the family wants to make an IRA contribution for your spouse, you must:
- Have earned income or other eligible compensation that's at least as much as your total contribution to your IRAs.
- File a joint income-tax return with your spouse.
Contribution Limits for Traditional and Roth IRAs
For 2019, the individual contribution limit is $6,000 for Americans under age 50, $7,000 for anyone 50 or older. All of that money must come from earned income or other eligible compensation; you cannot contribute more to your spouse's (or your own) IRA than you earned for that year.
You can contribute those amounts to each of your IRAs, for a maximum of $12,000, $13,000, or $14,000 in 2019—depending on whether either or both of you qualify for the catch-up contribution at age 50.
If you or your spouse are 50 or older, you're eligible to make additional, catch-up contributions.
Compensation Limits, Just for Roth IRAs
There is no cap on how much income you can earn and still be eligible to fund a traditional IRA, although the more you earn, the less of a tax deduction you may get. However, If you want to contribute to a Roth IRA for your spouse (or yourself), there are income limits.
For 2019, a married couple filing jointly with a modified adjusted gross income (MAGI) of up $193,000 is eligible to contribute the full amount to each of their Roth IRAs ($6,000 per person; $7,000 for those 50 or older). Couples with incomes between $193,000 and $202,999 can make partial Roth contributions. Once their income exceeds $203,000, they no longer qualify for Roth IRAs.
If you do not participate in an employer-sponsored plan, such as a 401(k), you will be able to deduct the full amount of your spousal IRA contribution to a traditional IRA. If you are covered by an employer-sponsored plan, your ability to deduct any traditional IRA contributions depends on your income and your tax filing status. These rules are explained in IRS Publication 590-A, which is updated annually.
"One of the major benefits we see, and the biggest reason I see for contributing to a spousal IRA, is the tax benefit," says Bryan Ward, CFP®, CIMA®, with ProCore Advisors in Newport Beach, Calif. "Many couples we work with are in higher tax brackets and are looking for additional ways to lower their taxes. In addition to lowering the couple’s taxable income, it provides another vehicle to save for retirement."
Unlike a regular checking or savings account, for example, spouses can't hold IRAs jointly. The IRA you contribute to for your spouse must be in their name and tax identification number. Similarly, any IRA you establish for yourself must be in your name and tax identification number.
In addition to the rules specifically for spousal IRAs, there are some that apply to IRAs in general:
- IRA contributions must be made in cash (which includes checks). Securities, including mutual funds and stocks, may not be used to make an IRA participant contribution.
- Contributions for a tax year must be deposited or mailed to your IRA custodian by April 15 of the following year. Make sure to obtain a receipt if you mail your contributions, or send them by traceable mail. You may need to provide proof of the date of mailing should your contribution reach your IRA custodian/trustee after April 15. Note that for any year that the deadline falls on the weekend, it is extended to the next business day.
- Remember to indicate the tax year to which your contribution should be applied. IRA custodians/trustees will generally deposit your contribution for the current year unless you indicate on the check or accompanying documentation that the contribution is for the previous year.
- You don't have to make your full contribution in one payment. Instead you can make partial contributions throughout the year, as long as they all arrive by the April 15 deadline.
- You can make your IRA contribution even after you have filed that year's income tax return, again provided you meet the April 15 deadline.