A married couple who files a joint tax return may be able to make a tax-deductible contribution to an IRA for a non-working spouse. This is a tax deduction that many taxpayers miss.
You could be prohibited from making a deductible IRA contribution because you are a participant in an employer plan such as a 401k, but what about your spouse? The tax code allows a working spouse to make a tax-deductible contribution for a non-working spouse when they file a joint tax return and meet income limits.
- Perhaps your spouse works, but is not covered by an employer plan.
- Perhaps your spouse does not work in this tax year.
In either case, the working spouse may make a tax deductible IRA contribution for the other provided the working spouse’s income exceeds the total of all IRA contributions for the couple.
The income phase-out has increased so if you have not looked at this in a while be sure to check it out before you file your taxes. For tax year 2020 it starts at an adjusted gross income of $196,000 and phases out entirely at $206,000. This permits some married couples to contribute the full $6,000 ($7,000 for age 50 and over) for the spouse without an employer plan and they receive a full tax deduction provided they are under the adjusted gross income of $196,000.
IRA contributions can be made until you file your tax return. Income phase outs for a 2019 contribution are slightly lower so check with your tax advisor if you are making a prior year’s contribution.
Beginning in 2020, the age limit has been removed on IRA contributions. Prior to 2020 a taxpayer could not make an IRA contribution after age 70 ½. As a result of the SECURE Act, there is no longer an age limit when the taxpayer (or the spouse) has earned income.
Making an IRA contribution after age 70 ½ will adversely impact future charitable contributions from your IRA so be sure to consult your tax advisor to make certain this is an appropriate strategy for you. Call Guelich Capital for a personal consultation.
Written by Connie C. Guelich, CFP, AEP, CLU, ChFC. This represents our view at the time of this writing and is subject to change. This is not intended to be personal investment advice. If you would like to discuss your own account, please don’t hesitate to call us. We are here to help and welcome your call.