When can you contribute to personal IRA?

mregal · ‎June 6, 2019

My wife and I file jointly, we are both over 50 years old.

I still work and have an employer 401K plan. My MAGI exceeds IRA contribution limit for deduction. I will do a 2018 contribution of $6,500 to personal IRA, knowing no deduction allowed since my MAGI is too high and I'm covered by an employer 401K plan.

My wife is retired. Her income is zero. She is not covered by an employer 401K plan. Now my questions:

1) Because her income is zero, is she eligible to contribute to her own personal IRA at all? The money used for a contribution would have to come from our jointly held accounts.

2) If #1 is ok and she is eligible to contribute, is her contribution deductible because her income is zero and she is not covered under an employer 401K plan, or is not deductible because my MAGI (or is it our MAGI since we file jointly) exceeds the limit?

Rachel_W · ‎June 6, 2019

1) Yes, your wife can make a Traditional IRA Contribution even though she is retired and did not have any "earned" income if she is under the age of 70 1/2 as of 12/31/18. This is known as the "spousal IRA".

2) If she is under the age of 70 1/2 and makes a contribution to her Traditional IRA, it will be deductible if your joint Modified Adjusted Gross Income (MAGI) does not exceed $199,000. If your MAGI is below $189,000 she can make a $5,500 deductible IRA Contribution ($6,500 if age 50 or older) and if it is between $189,000 and $199,000 she will be able to make a partial deductible contribution.

Please comment below if you need further clarification.

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mregal · ‎June 6, 2019

You're awesome! Thanks for a detailed response!

Rachel_W · ‎June 6, 2019

You're welcome!

rogerdaleshirley · ‎June 6, 2019

I understand the IRS rule, but my TurboTax program has tied my MAGI into my wife, who doesn't work (there's no W-2 for her in the Personal Income section), so the IRA contribution in her name is not eligible as a deduction?? What should I check in my input of information to separate her from my MAGI, even though we file Jointly?

macuser_22 · ‎June 6, 2019

@rogerdaleshirley - On a joint return there is only one MAGI for both spouses.    The spouse not covered by a retirement plan has higher limits but there arr still limits.

For 2015, 2016, 2017 and 2018, your total contributions to all of your traditional and Roth IRAs cannot be more than:

  -  $5,500 ($6,500 if you’re age 50 or older), or
  - your taxable compensation for the year, if your compensation was less than this dollar limit.

     (Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, alimony and separate maintenance, and nontaxable combat pay ).

See this IRS link for Traditional IRA deduction limits when covered by a retirement plan at work.

<a rel="nofollow" target="_blank" href="https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits">https://www.irs.gov/Retirement-Plans/IRA-...>

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

When can you contribute to personal IRA?

Retirement tax questions

Retirement tax questions

Retirement tax questions

Retirement tax questions

Retirement tax questions