Solved: Spousal IRA revisited

redwoodreturn · May 31, 2019 6:05:18 PM

Every time I think I’m right about this, it turns out it’s not so, so here it is. Alice works and contributes to a 401(k), while her husband Ralph has retired with a pension. Filing jointly, they would like to make a fully tax deductible contribution to Ralph’s traditional IRA. It may come down to the definition of actively participating in an employer plan. As Alice participates actively by contributing to her defined contribution plan, modified adjusted gross income limits are to be considered; their household income is $130,000 exceeds $118,000, so she can’t deduct a contribution to her own IRA. Looking at the household income limit of $193,000, Alice would like to deduct a contribution made to her husband's IRA. But Ralph may be an active participant in his defined benefit plan by merely receiving from it, so does that take away their hope of making a deductible contribution to a spousal IRA? They have also looked into whether Ralph can contribute to his traditional IRA by himself, as his pension is taxable income, but it appears the income has to come from actual work to qualify for the contribution to be tax deductible. Thank you.

Spousal IRA revisited

I too would like to think that receiving monthly benefit checks from Ralph's pension does not make him an active participant in his retirement plan, but may I ask what makes you sure?

From IRS Pub 590-A (<a rel="nofollow" target="_blank" href="https://www.irs.gov/publications/p590a/ch01.html#en_US_2015_publink1000230462">https://www.irs.gov/p...>) :

Situations where you are not covered.

Benefits from previous employer's plan. If you receive retirement benefits from a previous employer's plan, you are not covered by that plan.