Spousal IRA Contribution and Deduction Limits for 2017

2017 Spousal IRA Contribution and Deduction Limits

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You can still set aside money for retirement in a tax-friendly way even if your spouse is a stay-at-home parent or you don’t have earned income from work. Spousal IRAs are an effective way to contribute the maximum amount to an individual retirement account each year.

You must file jointly as a married couple to qualify, however, and the working, earning spouse must earn enough income to fund the IRA. Combined contributions can’t be more than the taxable compensation reported on your joint return, and your spouse must be younger than age 70 1/2. The age rule does not apply to Roth IRAs.

Contribution Limits for Spousal IRAs in 2017

IRA contribution limits change periodically to keep up with inflation, but spousal IRA limits remained unchanged in 2017 from what they were in 2016.

You could still contribute up to a maximum of $5,500 to a spousal IRA in 2017. The spousal IRA contribution limit increased to $6,500 if you were age 50 or older. This extra allowance is a catch-up contribution that's designed to help individuals save more as they near retirement age. 

The working/contributing spouse must have earned income equal to or greater than the combined contribution amounts of both spouses.

These are contribution and deduction limits for the 2017 tax year. They do not apply in the 2019 tax year. Some limits are indexed for inflation, so they can increase annually.

Spousal IRA Deduction Limits in 2017

You could deduct your full contribution to a spousal IRA in 2017 if you had an adjusted gross income (AGI) of $186,000 or less as a married couple. You could deduct some portion of your contribution, although not the full amount, if your AGI was between $186,000 and $196,000 in 2017.

A working spouse has the ability to deduct the full amount up to the contribution limit if she doesn't have a retirement plan through her employer. But deductions for contributions to the spouse's IRA began phasing out at an AGI of $99,000 in 2017, and they were eliminated entirely for those with AGIs of $119,000 or more, if the working spouse did have a plan available at work. This rule is still in effect in 2019, but with different phaseout limits.

There are no AGI limits when both spouses work and neither has access to a qualified retirement plan through work. If both spouses work and have access to a work plan, the $99,000 and $119,000 thresholds would have applied to both of them in 2017.

Lump Sum Contributions

It's often easier for people to make regular contributions throughout the year, but you don't have to do this to take advantage of spousal IRA benefits. You can make one lump-sum contribution up until the actual deadline to file your taxes for that particular year. This provides an excellent last-minute tax savings strategy.

Roth IRA Limits in 2017

You can also put some of your income aside in a Roth IRA for the benefit of your nonworking spouse. Married couples filing jointly were eligible to contribute to a Roth IRA if they made less than $196,000 in 2017. The contribution limit for a Roth was $5,500 in 2017, although your limit might be less if your adjusted gross income was between $186,000 and $196,000.

The greatest benefit of a Roth IRA is how the earnings are taxed after you reach age 59½ and if you've held the Roth account for at least five years. Although you can't claim a tax deduction for contributions you make to a Roth IRA, your earnings grow tax-free and you can make withdrawals tax-free at retirement.

You can also take distributions without any taxes or penalties after five years because they were made using after-tax dollars.

2017 Self-Employed IRA Limits

If your spouse earns a small amount of income from some type of freelance or contracting work, a self-employed IRA might be an option. You could contribute up to $12,500 to a SIMPLE IRA in 2017, and an extra $3,000 in catch-up contributions if you were age 50 or older. You could contribute up to 25 percent of your gross income or $54,000 to a SEP IRA in 2017.

The content on this site is provided for information and discussion purposes only. It is not intended to be professional financial advice and should not be the sole basis for your investment or tax-planning decisions.