Spousal IRA Income Limits and Contribution Rules

A Spousal Individual Retirement Arrangement (IRA) allows a spouse with little to no income to have an IRA funded by the working spouse. The fundamental purpose is to permit married couples to save for retirement on behalf of a spouse who does not have sufficient earned income to contribute to an IRA on their own.

Spousal IRA Eligibility and Contribution Rules

To contribute to a spousal IRA, a couple must be married and file a joint federal income tax return; couples who are married but file separately are not eligible.

A primary rule governing spousal IRAs is the compensation requirement. The total combined contributions to both the working spouse’s IRA and the spousal IRA cannot exceed the couple’s total taxable earned income for the year. For instance, if a couple’s total earned income is $12,000, their combined IRA contributions cannot surpass this amount.

For 2025, the maximum annual contribution to an IRA is $7,000. Individuals who are age 50 or older can make an additional catch-up contribution of $1,000, bringing their total potential contribution to $8,000. These limits apply to spousal IRAs, meaning a working spouse can contribute up to the maximum amount to their own IRA and another full contribution to the spousal IRA, provided their joint income is sufficient.

Income Limits for Traditional Spousal IRA Deductibility

The deductibility of contributions to a Traditional Spousal IRA depends on the couple’s Modified Adjusted Gross Income (MAGI) and whether the working spouse is covered by a retirement plan at work. MAGI is a taxpayer’s adjusted gross income with certain deductions and exclusions added back. This figure is used by the IRS to determine eligibility for certain tax benefits.

If the working spouse is covered by a workplace retirement plan, such as a 401(k), the ability to deduct contributions to a spousal IRA is subject to income limitations. For 2025, if the couple’s MAGI is below $236,000, the contribution to the spousal IRA is fully deductible. The deduction is phased out for MAGI between $236,000 and $246,000. If their MAGI is $246,000 or more, no deduction can be taken for the spousal IRA contribution.

If the working spouse is not covered by a workplace retirement plan, the contribution to the spousal IRA for the non-working spouse is fully deductible, regardless of the couple’s income.

Income Limits for Roth Spousal IRA Contributions

For couples who may not benefit from a Traditional Spousal IRA due to high income, a Roth Spousal IRA can be an alternative. Contributions to a Roth IRA are made with after-tax dollars, meaning they are not tax-deductible.

The ability to contribute to a Roth Spousal IRA is based on the couple’s MAGI. For 2025, a married couple filing jointly can make a full contribution to a Roth IRA if their MAGI is less than $236,000. The ability to contribute is phased out for couples with a MAGI between $236,000 and $246,000. If their MAGI is $246,000 or more, they are not eligible to contribute to a Roth IRA for that tax year.

Setting Up and Funding a Spousal IRA

The account must be opened in the name and Social Security number of the spouse with little or no earned income, as IRAs cannot be held jointly. Once the account is open, the working spouse can make contributions on behalf of the non-working spouse. The funds can be transferred from a joint bank account or the working spouse’s individual account.

When it comes to tax time, how the contributions are reported depends on the type of IRA. If the contributions to a Traditional Spousal IRA are deductible, they are reported on Form 1040 to reduce the couple’s taxable income. If contributions were made to a Traditional IRA but are not deductible, Form 8606 must be filed to keep track of the after-tax basis. Contributions to a Roth IRA are not reported for a deduction, as they are made with after-tax money.