The tax benefits of traditional and Roth IRAs are a big help to people saving for retirement. The Internal Revenue Service sets limits on how much a married couple can put in their IRAs every year -- the limits discussed in this article for the 2012 tax year. You need to be mindful of these rules and check them annually, because the IRS charges a 6 percent tax on excess contributions.
Spousal IRA Rules
IRAs can be opened and owned only by individuals, so a married couple cannot jointly own an IRA. However, each spouse may have a separate IRA or even multiple traditional and Roth IRAs. Normally you must have earned income to contribute to an IRA. However, under IRS spousal IRA rules, both spouses may contribute to IRAs as long as one has earned income equal to or greater than the total contributions made each year. Furthermore, spouses may contribute to each other’s IRAs. To take advantage of the spousal IRA rules, a married couple must file a joint tax return.
The maximum amount you can add to an IRA in a single year is $5,000. Once an individual is 50, the limit rises to $6,000. If you have more than one IRA account, this limit applies to your combined contributions to all IRA accounts, not to each IRA separately. When both partners in a marriage contribute to IRAs, they can contribute $5,000 to each spouse’s IRA for a combined total of $10,000 per year. If one spouse is at least 50, the combined maximum is $11,000. When both spouses reach age 50 the maximum rises to $12,000.
Traditional IRA Income Limits
When you or your spouse is covered by a retirement plan at work, the IRS sets income limits on the amount you can deduct for contributions to a traditional IRA. You can still add the same amount of money each year but you don’t get the tax deduction. If you are covered at work, your tax deduction is gradually reduced, or phased out, as your adjusted gross income rises from $92,000 to $112,000. If your spouse is covered by a work-based retirement plan and you are not, your phase-out limits are $173,000 to $183,000. If neither of you are covered by an employer-provided retirement plan there are no income limits.
The IRS applies a different set of phase-out rules to Roth IRAs than to traditional IRAs. For a married couple filing jointly, each spouse’s contribution limit is gradually reduced to zero as the couple’s AGI increases from $173,000 to $183,000. Once their AGI exceeds $183,000, neither spouse may add money to a Roth IRA. Roth phase-out rules apply whether or not either spouse is covered by a retirement plan at work. However, both spouses may continue to contribute to traditional IRAs.