Can a Husband Contribute to an IRA for an Unemployed Wife?

An unemployed wife can sometimes contribute to an IRA by “borrowing” her husband’s income. This isn’t the type of borrowing she has to pay back. The husband simply needs to share the income by filing a joint tax return with the wife. Some restrictions are imposed, and a few of them are determined by whether the contributions are made to a traditional IRA or a Roth IRA.

Husband’s Income

Taxable compensation is required to make contributions to either a traditional IRA or a Roth IRA. This type of income is composed of amounts earned from working. For an unemployed wife to make IRA contributions, her husband must have wages, salaries, or self-employment income. Investment income or rental income is not included. A loss from self employment doesn’t reduce the calculation of taxable compensation.

Wife’s IRA

A nonworking wife can use the taxable compensation of her husband to make an IRA contribution up to the maximum of $5,000 per year (or $6,000 if she is 50 or older) for 2012. Her IRA contribution cannot exceed the husband’s taxable compensation less his IRA contributions. As long as he earns enough taxable compensation, both of them can contribute the maximum to their IRAs. The husband isn’t required to make an IRA contribution for the wife to make one using his taxable compensation.

Age

No one is permitted to make contributions to a traditional IRA if they attain age 70½ by the end of the year. A wife who is older than that cannot contribute to an IRA even if her husband is younger. No age limit is imposed for making contributions to a Roth IRA. A wife can make a Roth IRA contribution while her husband makes a traditional IRA contribution as long as they have sufficient taxable compensation.

Roth IRA

Contributions to a Roth IRA are prohibited when modified adjusted gross income (MAGI) exceeds a limit established each year by the Internal Revenue Service. The 2012 limit is $183,000 for a couple filing a joint tax return. Therefore, a wife cannot contribute to a Roth IRA using her husband’s taxable compensation when their joint MAGI exceeds the annual limit. For most couples, MAGI is the same as adjusted gross income on their tax return.

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