Spousal IRA Contribution and Deduction Limits for 2019 and 2020

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Just because you don’t earn income from a job, doesn’t mean you can’t save for your retirement. In fact, as long as your spouse works, they can set up a tax-advantaged retirement account on your behalf. It’s referred to as a spousal IRA and it works very similarly to other IRAs.

As a married couple, you can both have an IRA (Individual Retirement Arrangement) as long as you file your taxes jointly and at least one of you earns enough money to meet the funding rules for two IRAs. Combined IRA contributions for both can’t be more than the taxable compensation reported on your joint tax return.For traditional IRAs, you both must be younger than 70 ½ to contribute. There is no age restriction for Roth IRAs.

Spousal IRA Contribution Limits

The same limits apply to IRAs whether they are set up on behalf of a spouse or not. In 2020, you can contribute up to $6,000 to a traditional IRA, or $7,000 if you're 50 or older, as long as your taxable compensation is at least that. (The extra $1,000 is a catch-up contribution that's designed to help people save more as they get closer to retirement age.) So a married couple could contribute up to $12,000 to two IRAs, or $14,000 if they’re 50 or older.

These limits were the same in 2019.

Spousal IRA Deduction Limits

Just like with other traditional IRAs, a couple can deduct the full contribution to a traditional spousal IRA from federal income taxes in 2019 and 2020 if neither is covered by a defined contribution plan, such as a 401(k), an IRA-based plan, or a pension plan that's provided by an employer.(You may be considered covered by a plan if any contributions are made to your account.)

If you are covered by any of these employer retirement plans, your ability to deduct your contribution to a spousal IRA is based on your modified adjusted gross income (MAGI). For the 2019 tax year, here are the income parameters:

If your MAGI is ... ... you can take ...
$103,000 or less a full deduction up to the contribution limit.
more than $103,000 but less than $123,000 a partial deduction.
$123,000 or more  no deduction.
(The comparable figures went up to $104,000 and $124,000 for the 2020 tax year.)

Roth IRA Differences

Unlike traditional IRAs, which are funded by pre-tax contributions, Roth IRA contributions are not tax-deductible because they’re funded by after-tax contributions (and the withdrawals you’ll eventually make will not be taxed again.) 

Your eligibility to contribute to a Roth IRA for you or your spouse is based on your MAGI. These are the income parameters for 2020 contributions:

If your MAGI is ... ... you can contribute ...
less than $196,000 up to $6,000, or $7,000 if you’re 50 or older
more than $196,000 but less than $206,000 a reduced amount.
$206,000 or more zero.
(In 2019, the comparable figures were $193,000 and $203,000.)

To determine the partial amount you may contribute if you are in that middle band of incomes, first subtract $196,000 from your MAGI. Divide the resulting number by $10,000. Then multiply that number by the maximum contribution limit ($6,000 or $7,000, whichever applies). And finally, subtract that number from the maximum contribution limit.

A Lump-Sum Contribution

It's often easier for people to make regular contributions throughout the year, but you don't have to do that to take advantage of spousal IRA benefits. You can make a single lump-sum contribution up until the deadline to file your taxes for that particular year. So for 2019, you have until April 15, 2020.

Article Sources

  1. Internal Revenue Service. "IRA FAQs - Contributions." Accessed Jan. 16, 2020.

  2. Internal Revenue Service. "Traditional and Roth IRAs." Accessed Jan. 16, 2020.

  3. Internal Revenue Service. "Retirement Topics - IRA Contribution Limits." Accessed Jan. 16, 2020.

  4. Internal Revenue Service. "IRA Deduction Limits." Accessed Jan. 16, 2020.

  5. Internal Revenue Service. "Are You Covered by an Employer's Retirement Plan?" Accessed Jan. 16, 2020.

  6. Internal Revenue Service. "2019 IRA Deduction Limits - Effect of Modified AGI on Deduction if You Are Covered by a Retirement Plan at Work." Accessed Jan. 16, 2020.

  7. Internal Revenue Service. "Amount of Roth IRA Contributions That You Can Make For 2019." Accessed Jan. 16, 2020.

  8. Internal Revenue Service. "IRA Year-End Reminders." Accessed Jan. 16, 2020.