Spousal IRA Contribution Limits for 2015
How Much Can You Put in a Spousal IRA in 2015?
First thing's first, you should know exactly how a spousal IRA works. It is an individual retirement account for the non-working member of a couple. Even parents who stay at home need to think about retirement, and a spousal IRA is a great way to rack up some tax-deferred savings.
Spousal IRAs are available if you are married and file income taxes jointly as a couple. If the working spouse earns enough money to fund an IRA, you are eligible to make up to the maximum annual contribution. Depending on the household income and the amount your spouse contributes to his or her IRA or 401(k) through work, you may even be able to deduct the contributions from your household gross income. (Finances 101 dictates that anything that lowers your taxable income is a good idea.)
2015 Contribution Limits for Spousal IRAs
The amount that can be contributed each year changes every few years, but it has remained the same since 2013. In 2015, the most you can put into a spousal IRA is $5,500. Individuals age 50 or older have an additional $1,000 in catch-up contributions. (Incidentally, the same limits hold true for traditional IRAs and Roth IRAs in 2015.)
2015 Deductibility Contribution Limits of Spousal IRAs
Besides amassing tax-deferred savings, a great benefit of making spousal IRA contributions is the potential income tax deduction. How it works depends on whether your spouse is covered through a plan at work. If your spouse is covered and your household adjusted gross income (AGI) is $183,000 or less, you are eligible for a full deduction. Or you can take a partial deduction with a household income of between $183,000 and $193,000. If the working spouse doesn't have a retirement plan through work, the spouse can deduct the full amount of the contribution regardless of the household income.
If you are married and you file separately, your modified must be less than $10,000 to qualify for a partial deduction.
Even if you don't make regular monthly contributions to a spousal IRA, like your spouse makes to a 401(k) or IRA at work, you have the chance to contribute up to the maximum before you file taxes for the year. That means when you go to file your taxes in April, you can also invest in an IRA for the prior tax year.
Try a Roth IRA instead?
If the deduction is not as important, you can open a spousal Roth IRA. It has the same annual contribution maximum you will find in a traditional spousal IRA, but without the possibility of taking a deduction. After tax dollars go into a Roth, the plan is designed so that future earnings and contributions will never be taxed again.
There are limits to who can participate in a Roth IRA, phasing out between $181,000 and $191,000 in income in 2015. If your household earns more, you are not eligible. If you are eligible, consider whether a Roth IRA (or a conversion to a Roth IRA from another type of IRA) is right for you.
2015 Self-Employed IRA Limits
The other consideration is, did the nonworking spouse make any income in the past year? Many stay at home parents, and stay at home people in general, bring in income from some type of freelance work or home business. For these individuals, contributing to a small business retirement plan dramatically increases the maximum contribute potential.
An investment called a SEP IRA is designed for self-employed income. You can have one even if you have a 401(k) plan or other IRA. You can contribute up to 25 percent of the income you earn, up to a maximum of $53,000 in 2015.
A SIMPLE IRA works pretty similarly, but the contribution limits max out at $12,500 in 2015. If you are age 50 or older you can make an additional catch-up contribution of $3,000.
Regardless of the plan, nonworking family members should demand a retirement plan. It can help lower taxes today and help create a comfortable life ahead.
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