What Is a Spousal IRA?

A spousal IRA lets a married couple use one spouse’s earned income to contribute to retirement accounts for both people. It is a regular traditional or Roth IRA in the account owner’s name, rather than a separate IRA product or a joint account.

The arrangement can help when one spouse has little or no earned income. If the couple is married, files a joint tax return, and has enough eligible earned income, contributions may be made to the other spouse’s IRA as well as the earning spouse’s IRA.

How a spousal IRA works

“Spousal IRA” describes a contribution arrangement. The IRA can be newly opened or already exist, but it belongs to the spouse named on the account. That spouse owns and controls the assets, regardless of which spouse earned the income or supplied the cash.

Each spouse’s IRA remains separate. Marriage does not combine two IRAs into one shared retirement account.

The key eligibility rules

1. You must be married. The arrangement applies to spouses.
2. You must file a joint tax return. Married taxpayers filing separately do not qualify under these rules.
3. Earned income must cover the contributions. Combined IRA contributions for both spouses cannot exceed the couple’s eligible earned income or taxable compensation under the applicable rules. Investment income does not substitute for earned income.

Normal annual IRA limits still apply to each account owner across that person’s traditional and Roth IRA contributions. Those limits can change by tax year, so check the applicable year’s IRS limits before contributing.

A simple two-account example

Suppose Jordan earns $40,000 during the year and Casey has no taxable compensation. They are married and file jointly. Jordan may contribute to Jordan’s IRA and fund Casey’s separate IRA if each contribution stays within that year’s individual limit and their combined contributions do not exceed the available earned income.

• Jordan’s account: An IRA owned by Jordan.
• Casey’s account: A separate IRA owned by Casey.
• Household test: The total contributed to both accounts must fit within the couple’s eligible earned income, as well as each account’s annual limit.

Traditional or Roth IRA

A spousal contribution can fund either a traditional IRA or a Roth IRA. The spousal label does not change the tax rules that apply to the underlying account.

• Traditional IRA: Contributions may be deductible, depending on income and workplace retirement-plan rules. Withdrawals in retirement are generally taxed as ordinary income.
• Roth IRA: Contributions are made with after-tax dollars and are not deductible. Eligibility to contribute is subject to income limits, and qualifying withdrawals may be tax-free.

A workplace retirement plan can affect whether a traditional IRA contribution is deductible. Roth contribution eligibility and traditional IRA deductibility are separate questions from whether the couple meets the spousal-contribution rules.

Before making a contribution

• Confirm that you are married and will file jointly for the tax year.
• Total the contributions planned for both spouses’ IRAs.
• Compare that total with the household’s eligible earned income.
• Check the tax-year IRA contribution limits, Roth income limits, and traditional IRA deduction rules.
• Open the account in the spouse’s own name and choose a traditional or Roth IRA.

Frequently asked questions

Can both spouses contribute to an IRA if only one spouse has earned income?

Yes, if they are married, file a joint tax return, and their eligible earned income is sufficient to cover their combined IRA contributions. Each spouse must also stay within that person’s annual IRA contribution limit.

Is a spousal IRA a joint account?

No. It is a regular IRA owned by one spouse, even when the other spouse’s earnings support the contribution. Each spouse’s IRA is separately owned.

Do workplace retirement plans affect a spousal IRA?

They can affect whether a traditional IRA contribution is deductible. Traditional IRA deductibility can depend on income and workplace-plan coverage.

Can a spousal IRA be a Roth IRA?

Yes. A spousal contribution can go to a traditional IRA or a Roth IRA. Roth IRA contributions are made with after-tax dollars and remain subject to applicable income limits.

Sources

• Spousal IRA: What is it & How it Works - Equifax — www.equifax.com
• Answers to five of the most commonly asked questions about spousal IRAs — www.troweprice.com
• What Is a Spousal IRA? How It Helps Couples Save The Future — www.westernsouthern.com
• All You Need Is Love…and a Spousal IRA | Investment Company Institute — www.ici.org