Opening a Roth IRA for Your Non-Working Spouse – Eligibility, Income and Contribution Limits

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Can you open a Roth IRA for your spouse? This question comes up a lot among married couples with just one income. After all, one of the requirements for opening and funding a Roth IRA is earned income, right? And as a general rule, if you don’t have taxable earned income as a result of working, you’re ineligible to make a Roth IRA contribution.

However, most rules have exceptions, and this is one of them. The IRS waives the requirement that an individual generate taxable earned income in the case of married couples who file a joint tax return. Note the emphasis here, don’t assume that just because you’re married you can make a Roth IRA contribution without generating earned income. You need to file a joint tax return, and at least one spouse has to have taxable earned income.

Under this provision, if you’re married, file a joint tax return, and have over $10,000 in modified adjustable gross income, you and your spouse can both contribute the maximum amount of $5,500 to a Roth IRA ($6,500 each if you and your spouse are over 50 and earn $12,000 or more). This is the case even if one spouse generates zero dollars in taxable income.

Roth IRA Contributions When Married

If you’re married and you file a joint tax return, the IRS treats your income exactly as a “joint” tax return implies – as joint income. This means all income generated by the married couple belongs to each partner on an equal basis. There is no “yours” and “mine,” just “ours.”

Because both you and your spouse are joint recipients of your income, both of you can open a Roth IRA and make contributions – even though only one of you may be responsible earning all of the household income. Does this make sense?

If not, imagine the following example. Let’s say you’re a 42 year-old New York City hot dog vendor earning $150,000 per year. You and your spouse have three kids, and your spouse stays at home full-time taking care of the little ones.

As long as you file a joint tax return, both you and your spouse are eligible to contribute a total of $11,000 to two Roth IRAs – $5,500 to a Roth IRA in your name and $5,500 to a Roth IRA in your spouse’s name. Why? Because, in the eyes of the IRS, the two of you (as a married couple) generated the $150,000 in income. So even though you physically earned the $150,000, your spouse is also eligible to make a Roth IRA contribution.

OptionsHouse

In short, all the normal rules which apply to a married couple filing a joint tax return with both spouses working also apply to a married couple filing a joint tax return with only one spouse working.

Need an example? Let’s say both you and your spouse are 54 years old. You file a joint tax return, citing $165,000 in income. However, your spouse earns the entire $165,000, because you’ve been unemployed for the entire tax year.

In this case, both you and your spouse are eligible to contribute a total of $13,000 to two Roth IRAs – $6,500 to a Roth IRA in your name and $6,500 to a Roth IRA in your spouse’s name. Why? Because your $165,000 income puts you under the $173,000 limit for making the maximum annual Roth IRA contribution, which is $6,500 for someone 50 years old or older.

However, what happens next year when you find gainful employment earning $60,000 per year? Neither one of you is eligible to make a Roth IRA contribution. Why? Because your $225,000 income is well in excess of the $183,000 limit for a married couple filing jointly to make any sort of Roth IRA contribution.

Summary

If you’re a married one-income couple, you aren’t limited to one Roth IRA. As long as you file a joint tax return and meet the remaining eligibility requirements, both you and your spouse can make Roth IRA contributions. So take advantage of the rules. Only contributing to one spouse’s Roth IRA when you’re eligible to contribute to two cuts your Roth IRA retirement savings in half!

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{ 2 comments… read them below or add one }

Frank Rough April 16, 2012 at 10:35 am

What if, in filing jointly, both (over 60) had earned income but one made only $4,000 while the other made $30,000. If both incomes are considered as one, can the one making $30,000 contribute $2,000 towards the other’s $6,000 cap?

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andys2i April 16, 2012 at 6:40 pm

Short answer, YES. The income is considered joint, but IRAs are held seperately. So you can max out both Roth IRAs

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