Here's a passage from IRS publication 590-A, page 9-10 (from 2022) . Can someone explain why in the example below, they use their combined income to figure out both of their IRA contributions and make an IRA contribution the lower earner, contribution that is higher than his earned income?
Filing Status
Generally, except as discussed earlier under Kay Bailey Hutchison SpousalFiling Status Generally, except as discussed earlier under Kay Bailey Hutchison Spo..., your filing status has no effect on the amount of allowable contributions to your traditional IRA. However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. See How Much Can You Deduct, later.
Example. Tom and Darcy are married and both are 53. They both work and each has a traditional IRA. Tom earned $3,800 and Darcy earned $48,000 in 2022. Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $7,000, they can contribute up to $7,000 to his IRA for 2022 if they file a joint return. They can contribute up to $7,000 to Darcy's IRA. If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800.
