Turbotax, we have a problem-spousal IRA

[RogerD1]

The rules given for the Kay Bailey Hutchinson Spousal IRA contribution are not the only factors that determine the limit of the spousal contribution.  Here are some other factors:

• If the working spouse is covered by a retirement plan at work, the non-working spouse's deduction will start to be limited for incomes in excess of $236,000 and is completely phased out above $246,000.
• A working spouse covered by a retirement plan at work will have a limited deduction for incomes above $126,000, with the deduction fully phased out for an income above $146,000
• For low incomes, the total contribution is limited to the couple's taxable compensation.

Based on the screenshot above, it appears that you are using the downloaded version of TurboTax.  To see how the amounts above were determined you can view the IRA Deduction Worksheet as follows:

1. On the blue banner, click on Forms on the far right.
2. On the left side menu that appears, look for a form called IRA Worksheet.
3. After viewing the form, you can return to the interview mode by clicking on Step by Step in the blue banner.

[jnfrench]

Thank you. The three bullet points you listed do not apply to this example.

I understand how it works (I have been using TurboTax for at least 20 years) and the tax laws, but there is a bug in TurboTax that is not calculating the allowable deduction for spousal IRA contributions correctly (Specifically the IRA Calculator Tool under Other Tax Situations). If that is not clear from what I have already posted, please let me know, and I will provide additional examples to help.

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[saunder1]

I am not having a problem with deduction of the IRA. I do not qualify for that. But my spousal IRA is being taxed on the contribution when I should be allowed to contribute $8000k for 2025 without paying taxes on that contribution.

The spousal IRA does not have any income limits other than that the spouse must make enough money to fund the spousal IRA (plus their own if they choose to do so).

I believe you are referring to the rules for being able to DEDUCT an IRA.

Where the spousal IRA is deductible or not is based on income. HOWEVER, no spousal IRA contribution to a traditional IRA should be taxed so long as the spouse makes enough income to cover it.

There must be a BUG in TURBOTAX.  Does anyone know a way around it?  I appreciate any help.

I'll re-post. Perhaps this does not belong under deduction for ira.

[jnfrench]

"HOWEVER, no spousal IRA contribution to a traditional IRA should be taxed so long as the spouse makes enough income to cover it."

This is not true if the taxpayer has an employer-provided retirement plan. In that case, the deduction is income-limited.

If I have misunderstood your statement, please could you explain a little more about what you think the problem is.

[MelindaS1]

This should be working for you. I tested the functionality of spousal IRA contributions in TurboTax Home and Business Desktop, and did not have any issues. With a test taxpayer earning $78,000 in W-2 wages filing jointly with their stay-at-home spouse who had $0 income (compensation or other type), the employed taxpayer was able to contribute their maximum $7,000 to a Traditional IRA, and the low/no-income spouse was also able to contribute the maximum $7,000 to a traditional (“spousal”) IRA without triggering the creation of Form 5329 or the 6% tax on excess contributions.

To verify your entries: if you’re the income-earning taxpayer, do not enter the total combined IRA contributions (i.e. $14,000 per above) when asked about your contributions for the year; 

• Instead, separately enter the amount contributed to your own traditional IRA account when asked about your contributions, and then select Continue to enter the contribution amount to your spouse’s traditional IRA when asked next. 
• For both options to appear, check the checkboxes for both taxpayers as having a Traditional IRA and/or Roth IRA on the initial screen titled,  “Tell us about your IRAs / Select the kinds of IRAs owned or contributed to for 2025.”

Otherwise, you can troubleshoot the contribution limitation in TurboTax Desktop by selecting Forms in the upper right > Forms in My Return, on the left > IRA Contrib Wks - to review and edit the IRA Contributions Worksheet directly. 
 

@saunder1 Is there a more specific screen or tax form / worksheet where you are seeing the excess contribution tax being added, and is there a specific error message you can share? 

I understand you are aware of your ineligibility for an IRA contribution deduction, and that this question refers to taxes from Sec. 219(c) Kay Bailey Hutchinson spousal IRA contribution limits. Note, to qualify for a spousal IRA contribution: 

1. You must file a joint tax return - 219(c)(2)(A)
2. Your taxable compensation is less than that of your spouse - 219(c)(2)(B) 

Then, the limit for annual contributions to your spousal IRA is the smaller of:

1. $7,000 ($8,000 if over 50) 
2. The total compensation includible in the gross income of both you and your spouse for the year minus your spouse's Traditional IRA contribution for the year minus your spouse’s Roth IRA contributions (from any source) for the year

If you made excess IRA contributions in 2025, you may still have time to make a correction. Learn more:

TurboTax - What if I made an excess Roth IRA contribution because my income is too high?

TurboTax - How do I know if I contributed too much to my traditional IRA?

IRS Pub. 590-A (2025) - Contributions to Individual Retirement Arrangements (IRAs)

[saunder1]

Thank you . It is fixed now.

[jnfrench]

@MelindaS1 The bug I reported has not been fixed. I know that the information can be directly entered, but it is THE IRA CALCULATOR TOOL that is at fault, as I have shown several times on this thread. I am attaching another screen print to confirm that the tool incorrectly denies the spousal contribution.

[MelindaS1]

If you could provide different evidence that the Retirement Savings - IRA Calculator Tool in TT Home and Business Other Tax Situations is buggy, I can submit a higher investigation ticket. In that screenshot, you have the spouse and taxpayer flipped upside down where you're entering the contribution amount; I assume that's because you do not agree with 219(c)(2)(B) per earlier discussion, which is the logic programmed into TurboTax. See below, for a high salary taxpayer and spouse with $0 income, there is no problem in the tool calculating separate IRA contribution amounts for both:

The purpose of the IRA Calculator Tool, is for figuring if your MAGI / retirement plans at work, etc. would qualify you for additional deductions for contributions to a Traditional IRA made after the tax-year end, but before the due date of the tax return, the time period in which you can still make a "late" contribution to the IRA for a tax savings this year. It does not flow into the IRA worksheets, it's for planning purposes. Still, if there are material errors you can help me identify in the functioning of the calculator, they should be investigated.

In another screenshot, you had $7,678 as a hypothetical contribution For A, when the combined max contribution for both A and B was $7,678 . Since there are no joint IRAs, even Spousal IRAs are owned and controlled separately by the spouse, even if fully funded by the taxpayer, so it's important to remember that each spouse's IRA account contribution limits should be figured and entered separately. 

I appreciate the discussion in this thread; thanks for helping everyone think about their retirement options.