How a Stay-At-Home Spouse Can Make IRA Contributions
By Sarah Brenner, IRA Technical Expert
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If you are taking care of children and not working outside the home, you may believe that you are not eligible to make an IRA contribution. You may think that because IRA contributions must be based on taxable compensation, if you personally have not worked this year, you are out of luck.
That may not be case.
If you are married, you may be able to make an IRA contribution based on your spouse’s taxable compensation for the year. These IRA contributions are called “spousal IRA contributions." Spousal IRA contributions can be a valuable tool if you are a parent who has left the workplace to stay home with your children and you are concerned about the impact this may have on your retirement savings.
How it works
You make your IRA contribution using your spouse’s compensation. Your spouse can still contribute to an IRA as well. In fact, if your spouse has $11,000 in taxable compensation for the year, you can both contribute $5,500 to your IRAs for 2015. Keep in mind that other IRA contribution rules still apply. You must not be age 70 ½ or older in 2015 if you are contributing to a traditional IRA. You and your spouse must have modified adjusted gross income (MAGI) below $183,000 for you to fully fund a Roth IRA. Your spousal traditional IRA contribution is deductible if your spouse is not an active participant in a company retirement plan. If your spouse is an active participant, your spousal traditional IRA contribution is fully deductible as long as your MAGI is below $183,000.
You may make spousal IRA contributions in some years and regular IRA contributions in others. For example, if you are a stay-at-home parent in 2015, you may make a spousal contribution for 2015. If you go back to work next year in 2016 and have taxable compensation, you could then make a regular contribution for 2016. Your 2015 spousal IRA contribution and your 2016 regular IRA contribution may both be made to the same IRA. There is no need to keep regular and spousal contributions in separate IRAs. You do not have to inform the IRA custodian that you are making a spousal contribution instead of a regular contribution because there is no special reporting required by the IRS. You are not required to contribute to the same type of IRA as your spouse. For example, you may choose to contribute to a traditional IRA and your spouse may contribute to a Roth IRA. You are also not required to make your contributions at the same time or with the same IRA custodian.
To make a spousal contribution for 2015, you must be legally married on December 31, 2015. If you are divorced or legally separated as of that date, you are not eligible even if you may have been married earlier in the year. You must also file a joint federal income tax return for 2015.