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Attention Married Couples. Learn About Spousal IRAs.

What Is a Spousal IRA?

A spousal IRA is a retirement strategy that allows a working spouse to contribute to an individual retirement account (IRA) that is in the name of a non-working spouse with no income or very little income. This is an exception to the provision that an individual must have earned income to contribute to an IRA. The working spouse's income, however, must equal or exceed the total IRA contributions made on behalf of both spouses.

Spousal IRAs are regular Roth or traditional IRAs that are used by married couples. They are not joint accounts; each IRA is set up in the name of an individual spouse. For 2020 and 2021, the use of a spousal IRA strategy allows couples who are married filing jointly to contribute $12,000 to IRAs per year—or $14,000 if they are age 50 or older due to the catch-up contribution provision.

How a Spousal IRA Works

The couple must file a joint tax return (married filing jointly) to qualify for spousal IRA contributions. Spousal IRAs can be either traditional or Roth IRAs and are subject to the same annual contribution limits, income limits and catch-up contribution provisions as traditional and Roth IRAs. While IRAs cannot be held jointly in both spouse's names, spouses can share their account distributions in retirement.

The IRS has extensive rules on how IRAs must be structured and specific guidelines on how spousal IRA strategies can be deployed. According to the IRS, the amount of your combined contributions cannot be more than the taxable compensation reported on your joint return. If neither spouse participated in a retirement plan at work, all of their contributions will be deductible.

For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is, the deduction is phased out if the couple’s income is between $198,000 and $208,000 for 2020, up from $196,000 and $206,000 for 2020.