Contributing more to an IRA through a Spousal IRA

Well, sort of.  Many individuals who are married forget about contributing more to an IRA through a spousal IRA.  It is one of the easiest things to do, it makes relative sense (when you think of IRS rules), and is not overly complex. However, many people just simply forget about the option.

The keystone feature to making an IRA contribution is that the individual must have earned income.  Also, the “I” stands for “Individual”.  So, it is understandable that in a spouse/spouse marriage where one spouse does not work and earn taxable income, that both spouses might believe it is only potentially possible for the one working spouse with earned taxable income to contribute to an IRA.

Contributing More to an IRA Through a Spousal IRA

But, contributions to a spousal IRA are easy and straight-forward.  While easy, there are still rules…I mean this still is the IRS for goodness sake.  What thresholds must be met for contributing more to an IRA through a spousal IRA?

Income — Provided the income for the family (both spouses, whether both work or not) is high enough, the income that is not used to fund the working spouse’s IRA can be contributed into the spousal IRA.  The contributing spouse must have income that is at least the amount that is annually contributed to the non-working spouse’s spousal IRA.  If the working spouse also contributes to an IRA, then the annual earned income must be in excess to the combined contribution amounts made to two IRAs.

Age — The spouse who is having contributions made to their spousal IRA must be under the age of 70 1/2 in the year of the contribution…if the contribution is being made to a Traditional IRA.  If making the contribution to a Roth IRA, there are no age restrictions for the non-working spouse.

Marital Status — Well, since we have been saying the whole time, “spouse”, yes, you must be married to make contributions to the spousal IRA.

Tax Filing Status — You must file as Married, Filing Jointly to qualify to make the spousal IRA contribution.

Other Nuggets of Information

These might be what you would consider common sense, but a spousal IRA must be in the name of the non-working spouse and their corresponding Social Security number.  Whether a Traditional or Roth spousal IRA, if the non-working spouse goes back to work, and wants to make continuing IRA contributions, they can continue (if they want) to continue to keep using the same IRA for the same, non-spousal (because now they are working and have earned income) as when they made spousal contributions.

Contributing more to an IRA through a spousal IRA is worth consideration if you are married and one of the spouses is non-working and has no earned taxable income.   If you are under 50 and meet the modest rules, it is the equivalent of making an $11,000 contribution ($5,500 for both spouses).  If over 50 years of age, it is the equivalent of making a $13,000 contribution ($6,500 for both spouses).

As always, the intent of this post is to be educational in nature.  It is not intended, nor should it be interpreted as, any form of tax, legal, financial or investment advice.  You must always consult with your respective professional on all such matters.