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Can I invest in an IRA for my non-working spouse?

Have you ever wondered if you could invest in an IRA for your spouse who is not earning any compensation?

The answer is yes. The general rule is you need earned income to make IRA contributions. There is an exception to this rule, and it is called a “Spousal IRA”. It allows contributions to be made for a spouse who is out of work or who stays home to care for children, elderly parents, or other reasons.

Benefits of having an IRA account

  • For 2023, contributions of up to $6,500 to a traditional IRA may be tax deductible and,
  • The earnings on these funds are not taxed until withdrawn.
  • Contributions to Roth IRA are not tax deductible but future distributions are tax-free if certain requirements are met.

If the married couple has one spouse with earned income of at least $13,000 for 2023, $6,500 can be contributed to an IRA for each spouse (working and non-working) for a total of $13,000. The contributions can be mixed and matched between Traditional and Roth IRAs provided the total does not exceed $13,000.

Individuals who are age 50 or older can make catch-up contributions of $1,000 each. Therefore, a taxpayer and their spouse who have both reached age 50 in 2023 can contribute up to $7,500 each or a combined deductible limit of $15,000.

There are certain conditions that need to be met to contribute toward Spousal IRA

  • The couple needs to file as “Married filing jointly”.
  • The spousal IRA cannot be co-owned. It should be in the name of and owned by the non-working spouse.
  • Contributions can be made only if the couple’s AGI doesn’t exceed a certain threshold. This limit is phased out for AGI between $218,000 and $228,000.
Would you like to learn more?

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