Don't Miss Out on the Opportunity for a Spousal IRA

Don’t Miss Out on the Opportunity for a Spousal IRA

  • Learn more about the benefits of spousal IRAs.
  • Find out the compensation requirements for contributing to a spousal IRA.
  • Discover the maximum contribution allowed for spousal IRAs.
  • Which is the better choice: a traditional or a Roth IRA?

One frequently overlooked tax benefit is the spousal IRA. Generally, IRA contributions are only allowed for taxpayers who have compensation (the term “compensation” includes wages, tips, bonuses, professional fees, commissions, taxable alimony received, and net income from self-employment). Spousal IRAs are the exception to that rule. They allow a non-working or low-earning spouse to contribute to his/her own IRA, otherwise known as a spousal IRA. A spouse may do this as long as they have adequate compensation.

A non-working or low-earning spouse has the same maximum amount contribution as the working spouse ($6,000 for 2020). If the non-working spouse’s age is 50 or older, that spouse can also make “catch-up” contributions (limited to $1,000), raising the overall contribution limit to $7,000. These limits apply provided that the couple together has compensation equal to or greater than their combined IRA contributions.


Tony has a job and his W-2 for 2020 equals $100,000. His wife, Rosa, age 45, has a small income from a part-time job totaling $900. Rosa’s compensation equals less than the contribution limit for the year. So, she can base her contribution on their combined compensation ($100,900). Thus, Rosa can contribute up to $6,000 to an IRA for 2020.

Don't Miss Out on the Opportunity for a Spousal IRA

Spousal IRA Types

The contributions for both spouses can be made either to a traditional or Roth IRA, or split between them as long as the combined contributions don’t exceed the annual contribution limit. Caution: The deductibility of the traditional IRA and the ability to make a Roth IRA contribution are generally based on the taxpayer’s income:

  • Traditional IRAs – The traditional IRA has no income limit that restricts contributions. However, if the working spouse actively participates in any other qualified retirement plan, a tax-deductible contribution can be made to the IRA of the non-participant spouse. This can only occur if the couple’s adjusted gross income (AGI) doesn’t exceed $196,000 in 2020 (up from $193,000 in 2019).
  • Roth IRAs – Roth IRA contributions are never tax deductible. Contributions to Roth IRAs are allowed in full if the couple’s AGI doesn’t exceed $196,000 in 2020 (up from $193,000 in 2019). The contribution ratably phases out for AGIs between $196,000 and $206,000. This has increased from a range of $193,000 to $203,000 in 2019. Thus, no contribution is allowed to a Roth IRA once the AGI exceeds $206,000.


Rosa, from the previous example, can designate her IRA contribution as either a deductible traditional IRA or a nondeductible Roth IRA because the couple’s AGI is under $196,000. Had the couple’s AGI been 201,000, Rosa’s allowable contribution to a deductible traditional or Roth IRA would have been limited to $3,000 because of the phase-out. However, she could have contributed the other $3,000 to a traditional IRA and designated it as nondeductible.

Want to discuss IRAs or need assistance with your retirement planning? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations to discuss your situation.

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