Working Spouse IRA Contribution Rules

Retirement contribution rules for married couples where both individuals earn income involve a distinct set of rules, different from “spousal IRA” regulations designed for one-income households. The interaction between each spouse’s workplace retirement plan status and their combined income creates several scenarios. This framework governs how much can be contributed and whether those contributions can be deducted from taxable income.

Foundational IRA Contribution Rules

The ability for any individual to contribute to a Traditional Individual Retirement Arrangement (IRA) rests on having taxable compensation. This includes wages, salaries, commissions, and self-employment income. Without earned income, direct contributions to an IRA are not permitted.

The Internal Revenue Service (IRS) also establishes annual contribution limits. For 2025, an individual can contribute up to $7,000 to their IRA. However, a person cannot contribute more than their total earned income for the year if it is less than the limit; for example, an individual earning $5,000 can only contribute up to $5,000.

The tax code allows for “catch-up” contributions for those nearer to retirement. Individuals age 50 and over are permitted to contribute an extra $1,000, bringing their maximum potential contribution for 2025 to $8,000. This provision applies as long as their earned income meets or exceeds this higher threshold.

Deductibility for a Spouse Covered by a Workplace Plan

When a working spouse actively participates in an employer-sponsored retirement plan, the ability to deduct Traditional IRA contributions depends on the couple’s income. Being “covered” means an employer contributed to a retirement plan, like a 401(k), on the employee’s behalf during the year. This status is indicated by a checkmark in the “Retirement Plan” box on the employee’s Form W-2.

For a married individual covered by a workplace plan and filing a joint tax return, the deduction is subject to income limitations. For 2025, the deduction begins to phase out for couples with a Modified Adjusted Gross Income (MAGI) between $126,000 and $146,000. If the couple’s MAGI is below $126,000, the covered spouse can take a full deduction, while no deduction is allowed if their MAGI exceeds $146,000.

Within the phase-out range, the deduction is reduced proportionally. For instance, consider a 45-year-old individual covered by a 401(k) whose joint MAGI is $140,000. Because this income falls within the phase-out range, their maximum deductible contribution of $7,000 would be reduced, leaving a potential deduction of $2,100.

Deductibility for a Spouse Not Covered by a Workplace Plan

The rules are different for a working spouse who is not covered by a workplace retirement plan, even if their partner is. This scenario is governed by a separate and more generous income phase-out range. The couple’s combined income is the determining factor, but the thresholds are higher.

For 2025, a spouse who is not an active participant in a workplace plan can take a full deduction for their Traditional IRA contribution if the couple’s joint MAGI is $236,000 or less. The deduction is phased out if their MAGI falls between $236,000 and $246,000. No deduction is available once the couple’s MAGI exceeds $246,000.

To illustrate the difference, revisit the couple with a joint MAGI of $140,000. While the covered spouse’s deduction was limited to $2,100, the spouse who is not covered by a workplace plan can take a full $7,000 deduction. Their ability to deduct is preserved because the couple’s MAGI falls well below the $236,000 starting point for their applicable phase-out.

Roth IRA Contributions for Working Spouses

For couples whose income is too high to receive a tax deduction for Traditional IRA contributions, a Roth IRA is an alternative. Contributions to a Roth IRA are never tax-deductible, regardless of income. The main consideration for a Roth IRA is eligibility to contribute, which is based on income.

Eligibility is determined by the couple’s MAGI. For 2025, married couples filing jointly can each make a full contribution to a Roth IRA if their MAGI is less than $236,000. The ability to contribute is reduced for incomes between $236,000 and $246,000, and couples with a MAGI of $246,000 or more are not eligible to contribute.

A couple might find that their income surpasses the limit for deducting a Traditional IRA contribution but still falls within the range to contribute to a Roth IRA. For example, a couple with a MAGI of $180,000 where both spouses are covered by workplace plans cannot deduct Traditional IRA contributions. However, their income is below the $236,000 threshold, so they can each contribute the maximum amount to a Roth IRA.