Can a Nonworking Spouse Have an IRA?

IRAs offer tax-sheltered growth for retirement savings.

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Generally, to contribute to an individual retirement account, you have to have compensation or earned income, which includes salary, wages and self-employment income. However, if certain conditions are met, nonworking spouses can make contributions to IRAs. By taking advantage of a nonworking spouse's ability to contribute to an IRA, you can increase your retirement savings nest egg with tax benefits to boot.

Spousal IRA Contribution

A nonworking spouse may rely on the earned income of the working spouse to be eligible to contribute to an IRA. However, the working spouse's earned income cannot be counted twice. For example, if a working spouse has $9,000 of earned income and contributes $5,000 to her IRA, the nonworking spouse could contribute only $4,000 to his IRA. If the working spouse has earned income equal to or greater than the combined contribution limits for each spouse, both spouses can make full contributions.

Age and Income Limits Still Apply

Relying on the spouse's earned income satisfies only the earned income requirement for a nonworking spouse to contribute to an IRA. To contribute to a traditional IRA, the nonworking spouse must be under 70 1/2 years old as of the end of the year in which the contribution is made. To contribute to a Roth IRA, the joint income of the couple must be under the annual limits, published each year in IRS Publication 590.

Must File Jointly

You must file your federal income taxes jointly for the nonworking spouse to qualify to contribute to an IRA. If the nonworking spouse files a separate return from the working spouse, the nonworking spouse cannot use his working spouse's earned income to qualify for an IRA.

Deduction Not Guaranteed

If the working spouse participates in an employer-sponsored retirement plan, the nonworking spouse might not be able to deduct contributions to a traditional IRA. Each year, the IRS sets limits for the amount of income a couple filing jointly can have before the couple can no longer deduct the traditional IRA contributions made by the nonworking spouse. If the nonworking spouse can make only a nondeductible traditional IRA contribution, consider contributing to a Roth IRA instead because while Roth IRA contributions are not deductible, qualified distributions are tax-free.