Individual retirement accounts have been around since 1974. Though they were originally limited to people who weren't covered by an employer plan, as of 2012 that's no longer the case. When you're married, both you and your spouse can take advantage of the tax benefits offers by IRAs.
Separate Contribution Limits
The annual IRA contribution limits apply separately to each spouse, which means that a married couple can essentially put aside twice as much as a single person, but the contributions to either spouse's IRA can't exceed the annual limit. For example, say each spouse is eligible to contribute $5,000. The husband could contribute $5,000 to his account and the wife could contribute $5,000 to her account for a total of $10,000, but the husband couldn't contribute $10,000 to his if the wife didn't contribute at all.
Each spouse has to be eligible to contribute to an IRA. For traditional IRAs, that means each spouse has to be under age 70 1/2 at the end of the year of the contribution. For Roth IRAs, your modified adjusted gross income must fall below the annual limits, which are found in the Internal Revenue Service's Publication 590. In addition, all IRAs require compensation -- basically money that you earn from working -- but if you're married, you might be able to rely on your spouse's compensation if you don't work.
When you file a joint return with your spouse, the IRS doesn't care who earns the compensation as long as there is enough for both of you. For example, say each spouse's contribution limit is $5,000. If the working spouse has at least $10,000 of compensation, each spouse can make a full $5,000 contribution. If you're married but filing separately, you can't use your spouse's compensation to justify your IRA contribution.
If you're married and contribute to a traditional IRA, your eligibility to deduct it may be impaired by your spouse's participation in an employer plan. If you or your spouse is covered by an employer plan, you can only deduct your contributions if your joint modified adjusted gross income falls below the annual limits set by the IRS. If only your spouse is covered, the limits are higher than if you are covered. If you're married filing separately, the limits are very low -- $10,000 as of 2012 -- regardless of who is covered.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."