What is a Spousal IRA? (Rules, Limits, and Eligibility)

May 1, 2023

A Roth IRA or traditional IRA allows individuals with earned income during a tax year to make contributions into their accounts.

A spousal IRA is a traditional or Roth IRA that allows a married couple to contribute to an IRA for a spouse who has little or no income, as long as the couple files a joint tax return. The working spouse can contribute to both their own IRA and their non-working or low-income spouse’s IRA, effectively increasing the couple’s overall retirement savings.

The main benefits of a spousal IRA include the ability for both spouses to save for retirement, even if one spouse doesn’t work or earns less, and the potential for tax advantages. The specific tax benefits depend on whether the spousal IRA is a Traditional IRA or a Roth IRA.

How a spousal IRA works

A spousal IRA is not a different type of IRA. It’s simply a traditional or Roth IRA that allows a non-working spouse to be able to make contributions through their partner, as long as they file a joint tax return.

A traditional and Roth IRA typically only let you make contributions if you have earned income for the year. You’re allowed to contribute up to 100% of your earned income up to the IRA contribution limit (limits listed further down below).

A spousal IRA lets you contribute on behalf of your spouse if they have little to no income for the tax year. However, the requirement is that the working spouse makes at least enough income to cover both contributions.

For example, if you want to contribute $5,000 to your IRA and $5,000 to your spouse’s IRA, then you must have earned at least $10,000 in earned income.

Are spousal IRAs join accounts?

When opened, the spousal IRA is not a joint account. It’s a separate account in your spouse’s name. The spouse gets access to their own investment decisions, and can invest in traditional assets like stocks, bonds, mutual funds, and ETFs.

Contribution Limits

A spousal IRA has the same contribution limits as a traditional or Roth IRA.

For 2023, the IRA contribution limit is $6,500 if you’re under 50 years of age, and $7,500 if you’re at least 50 years old.

For a spousal IRA, the total combined contribution to both the working spouse’s IRA and the non-working spouse’s IRA cannot exceed the working spouse’s earned income for the tax year or the annual contribution limit, whichever is less.

Eligibility rules for a spousal IRA

To be eligible for a Spousal IRA, both the working and non-working spouses must meet certain requirements. Here are the key eligibility rules:

The couple must file a joint tax return

The couple must file a joint tax return in the year the contribution is made. Married couples who file separate tax returns are generally not eligible to contribute to a spousal IRA.

The working spouse must have earned income

The working spouse must have earned income in the tax year the contribution is made. Earned income includes wages, salaries, tips, commissions, and self-employment income. It does not include investment income, rental income, or other passive income.

Furthermore, the working spouse’s income must equal or exceed the combined contribution amount.

Roth IRA income limits & traditional IRA tax deduction limits

A traditional IRA and Roth IRA have income limits. If your Modified Adjusted Gross Income (MAGI) is too high, you won’t be able to make contributions to a Roth IRA. You can still contribute to a traditional IRA, but higher income levels may prevent you from getting a tax deduction on your contribution. And if only one of you is covered by a workplace retirement plan, but the other is not, then the IRS gives you higher tax deduction limits for a traditional IRA.

Here are the income limits for both the traditional and Roth IRAs.

Roth IRA income limits (filing jointly)

A Roth IRA doesn’t let you make contributions if your income is too high during the tax year.

If your joint income is $204,000 or less, you can contribute up to the maximum Roth IRA contribution limit of $6,500 ($7,500 if age 50+).
If your joint income is over $204,000 but less than $214,000, your contribution limit gets reduced.
If your joint income is over $228,000, you cannot contribute to a Roth IRA at all.

Traditional IRA income limits (filing jointly)

You can still contribute to a traditional IRA if your income is high, but you won’t get a tax deduction if your income is too high.

If your joint income is $116,000 or less, you’ll get the full deduction up to the contribution limits.
If your joint income is over $116,000 but less than $136,000, you will receive a partial deduction.
If your joint income is over $136,000, you will receive no tax deduction on your contributions for the tax year.

Traditional IRA income limits (filing jointly, only one spouse covered by workplace retirement plan)

A traditional IRA gives couples higher tax deduction limits if one spouse is covered by a workplace retirement plan (like a 401k) and the other spouse is not, or doesn’t work.

If your joint income is $218,000 or less, you’ll get the full deduction up to the contribution limits.
If your joint income is over $218,000 but less than $228,000, you will receive a partial deduction.
If your joint income is over $228,000, you will receive no tax deduction on your contributions for the tax year.

How to open a spousal IRA

Opening a spousal IRA is no different than opening a regular traditional or Roth IRA. Since a spousal IRA is not a special type of IRA on its own, you simply need to choose whether you want to open a traditional IRA, Roth IRA, or both, and then choose a financial institution that offers IRAs.

Who owns the assets in a spousal IRA?

The assets in the IRA belong to the account holder, not the person making the contribution. If you’re a working spouse, and open a spousal IRA for your partner, then they’ll be the one who owns the assets in the account even though you may be the one making contributions on their behalf.

Can a spousal IRA be a Roth IRA?

Yes, you can decide whether to open a spousal IRA as a traditional IRA, Roth IRA, or both.

When can you withdraw from a spousal IRA?

A spousal IRA has the same withdrawal rules as a traditional or Roth IRA, each having slightly different withdrawal rules.

Withdrawing from a spousal traditional IRA

You can start to take qualified distributions from your traditional IRA once you reach the age of 59½. Early withdrawals before the age of 59½ are hit with a 10% early withdrawal penalty plus income taxes on the amount drawn. After the age of 59½, qualified distributions have no 10% penalty, but you’re required to pay regular income taxes on the amount withdrawn.

A traditional IRA has required minimum distributions (RMD). You’re required to start taking distributions from your account once you reach the age of 73.

Also read: Traditional IRA Withdrawal Rules

Withdrawing from a spousal Roth IRA

With a Roth IRA, you can withdraw your contributions made to your account at any age without penalties or taxes. However, to withdraw earnings, your Roth IRA must be at least 5 years old, and you must be at least 59½ year of age. Early withdrawals of earnings before the age of 59½ are hit with an early withdrawal penalty plus income taxes.

A Roth IRA has no required minimum distributions, and you can keep your money compounding in your account as long as you’re alive.