Can a Nonworking Spouse Deduct an IRA if Filing Jointly?

by Cynthia Myers

    Even if a spouse doesn’t work outside the home, she needs to save for retirement. The Internal Revenue Service recognizes this and allows non-working spouses to set up tax-deductible individual retirement arrangements, or IRAs, where they can contribute money each year until they reach retirement age. You must file a joint return to take advantage of this deduction, and taxpayers with higher incomes may not be able to deduct all their contributions.

    Contribution Amounts

    A non-working spouse may contribute up to $5,000 to an IRA -- or $6,000 if he is older than 50 -- as of 2012. If the working spouse isn’t eligible for a qualified retirement plan at work, she may also contribute up to $5,000 to her IRA, or $6,000 if she is over 50. If these contributions are made to a traditional IRA, you can deduct the contributions from your income tax, provided you meet IRS income limits.

    Income Limits

    When a couple’s adjusted gross income reaches $173,000, the non-working spouse can deduct only part of her IRA contributions. The percentage you may deduct decreases as AGI rises, until AGI reaches $183,000, at which point none of the IRA contribution is tax deductible. This limit only applies if the working spouse is eligible for a retirement plan at his job. If the working spouse doesn’t have a retirement plan at work, the couple can continue to deduct their IRA contributions, regardless of their income.

    Excess Contributions

    If you contribute more than the maximum to your spousal IRA during the year, you won’t have to pay a penalty as long as you withdraw the excess amount by the date your tax return for that year is due (usually April 15). If you don’t withdraw the excess by this date, you must pay a 6 percent penalty on the excess amount. If your excess contribution earned any interest, the IRS considers that interest as income, and you must add the amount to your AGI.

    Roth IRA

    Instead of a traditional IRA, you can opt to contribute to a spousal Roth IRA. With a Roth IRA, your contributions aren’t tax deductible; you pay taxes on the amount now; when you withdraw the money after retirement, you pay no taxes on your withdrawals. Even though Roth IRA contributions for a non-working spouse aren’t tax deductible, they’re still subject to the $5,000 limit -- or $6,000 for spouses over 50.

    Photo Credits

    • father with two children on lap image by Pavel Losevsky from Fotolia.com

    About the Author

    Cynthia Myers is the author of numerous novels and her nonfiction work has appeared in publications ranging from "Historic Traveler" to "Texas Highways" to "Medical Practice Management." She has a degree in economics from Sam Houston State University. Before turning to freelancing full-time, Myers worked as a newspaper reporter, travel agent and medical clinic manager.

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