Spousal IRA Contributions in the Wake of the Great Resignation

Additionally, the IRS doesn’t impose any special reporting obligations if the client makes a contribution based on a spouse’s compensation for the year. The client simply makes the contribution as they would in any other “working” year.

The IRA contribution limit is the same regardless of whether the person contributing to the account is working (in 2022, the deductible limit is $6,000, or $7,000 for taxpayers who are 50 or older by year-end).

Active Participant Complication

The rules governing spousal IRA contributions become more complicated if the client’s working spouse is also an active participant in an employer-sponsored retirement plan at work (such as a 401(k) or 403(b) plan). If the spouse does have a retirement plan at work, the ability to deduct any IRA contributions will be limited by the couple’s modified adjusted gross income (MAGI).

For 2022, the non-working spouse can deduct the full IRA contribution limit if the working spouse is covered by a retirement plan at work and the couple’s MAGI is $204,000 or less. If the couple’s MAGI is more than $204,000, but less than $214,000, a partial deduction will be available for the non-working spouse’s IRA contribution.

The deduction will be denied entirely if the working spouse is an active participant in a workplace retirement account and the couple’s MAGI exceeds $214,000.

Conclusion

The Great Resignation has undoubtedly complicated financial planning for many clients over the past year. However, married clients should remember that they may remain eligible for funding their own retirement account based on a spouse’s income even if they don’t have earned income during the current year.

Learn more with Tax Facts, the go-to resource that answers critical tax questions with the latest tax developments. Online subscribers get access to exclusive e-newsletters.
Discover more resources on finance and taxes on the NU Resource Center.
Follow Tax Facts on LinkedIn and join the conversation on financial planning and targeted tax topics.
Get 10% off any Tax Facts product just for being a ThinkAdvisor reader! Complete the free trial form or call 859-692-2205 to learn more or get started today.