How Can a Nonworking Spouse Qualify for a Spousal IRA?

How Can a Nonworking Spouse Qualify for a Spousal IRA?

  • Learn how nonworking or low-earning spouses can contribute to a spousal IRA.
  • Discover the compensation requirements for contributions.
  • Learn about maximum contribution limits.
  • Find out more about traditional vs Roth IRAs.

One of the fallouts of the COVID-19 pandemic: Millions of people have dropped out of the workforce. This is particularly true for female workers with families. While they remain unemployed, these women will have lost the opportunity to build up their retirement nest egg through their employers’ retirement plans. However, these married individuals have an option to accumulate retirement funds that will help make up for some of their lost retirement savings. This frequently overlooked tax benefit is the spousal IRA.

Generally, only taxpayers who have compensation may make contributions. FYI: The term “compensation” includes wages, tips, bonuses, professional fees, commissions, taxable alimony received, and net income from self-employment. The spousal IRA is the exception to that rule.

Spousal IRAs allow a nonworking or low-earning spouse to contribute to his or her own IRA, otherwise known as a spousal IRA, as long as his or her spouse has adequate compensation.

Learn how nonworking spouses can qualify for a spousal IRA.

The maximum amount that a nonworking or low-earning spouse can contribute to either a traditional or Roth IRA (or a combination) is the same as the limit for a working spouse, which is $6,000 for 2021. If the non-working spouse is 50 years or older, that spouse can also make “catch-up” contributions (limited to $1,000). This raises the overall contribution limit to a spousal IRA to $7,000. These limits apply provided that the couple together has compensation equal to or greater than their combined IRA contributions.


Tony is employed, and his W-2 for 2021 is $100,000. His wife Rosa, age 45, didn’t work during the year after deciding to care for their children at home due to their difficulty finding childcare providers. Since her own compensation of zero is less than the contribution limit for the year, Rosa can base her spousal IRA contribution on their combined compensation of $100,000. Thus, Rosa can contribute up to $6,000 to a spousal IRA for 2021. Even if Rosa had done some part-time work and earned $2,500, she could still make a $6,000 IRA contribution.

Both spouses can make contributions 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

There is no income limit restricting contributions to a traditional IRA. However, if the working spouse actively participates in any other qualified retirement plan, a tax-deductible contribution can be made to the spousal IRA of the nonparticipant spouse only if the couple’s adjusted gross income (AGI) doesn’t exceed $198,000 in 2021. If the couple’s income equals $198,000 to $208,000, they may only take a partial deduction. Once their AGI reaches $208,000, no amount is deductible.

Roth IRAs

Roth IRA contributions are never tax-deductible. If a couple’s AGI doesn’t exceed $198,000 in 2021, they may make contributions in full to a Roth IRA. The contribution ratably phases out for AGIs between $198,000 and $208,000. Thus, no contribution is allowed to a Roth IRA for 2021 once the AGI exceeds $208,000.


Rosa from the previous example can designate her spousal IRA contribution to either a deductible traditional IRA or a nondeductible Roth IRA. She can do this because the couple’s AGI is under $198,000. Had the couple’s AGI been $203,000, Rosa’s allowable contribution to a deductible traditional or Roth IRA would have been limited to $3,000 because of the phaseout. She could have contributed another $3,000 (designated as nondeductible) to a traditional IRA.

Note: You can make contributions to IRAs for 2021 no later than April 18, 2022.

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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