8.3 Contributions to a Traditional IRA If You Are Married
If both you and your spouse earned compensation in 2012 of at least $5,000 and are under age 50 at the end of the year, each of you may make a contribution of up to $5,000 to a traditional IRA for 2012 by April 15, 2013. Under the spousal IRA rule, the $5,000 per spouse contribution limit applies even if only one of you works, provided you file jointly and your combined compensation is at least $10,000. An additional contribution of up to $1,000 can be made for each spouse who is age 50 or older by the end of the year so long as there is compensation to cover it.
Contributions for 2012 are fully deductible up to the $5,000 limit ($6,000, if applicable) if neither you nor your spouse was covered by an employer retirement plan during the year. If either of you was an active plan participant, you are both considered active participants, and a deduction may be limited or disallowed depending on your modified adjusted gross income (MAGI). However, if you file jointly and only one of you was an active plan participant, a more favorable MAGI phaseout rule applies to the nonparticipant spouse, so that the spouse without coverage may be able to claim a deduction even if the participant spouse may not. The deduction phaseout rules are discussed below.
Spousal IRA contribution on joint return for nonworking or low-earning spouse.
If you file a joint return for 2012, you and your spouse may each contribute up to $5,000 to a traditional IRA as long as your combined compensation is at least $10,000. If both of you were age 50 or older by the end of 2012, the contribution limit for each of you is raised to $6,000, so long as your combined compensation is at least $12,000. This spousal IRA rule allows a spouse with minimal earnings to “borrow” compensation from his or her spouse in order to reach the maximum contribution limit. In figuring a couple’s combined compensation for purposes of the “borrowing” rule, the higher earning spouse’s compensation is reduced by his or her deductible IRA contribution and by any regular contributions made by the higher earning spouse to a Roth IRA for the year.
Deduction phaseout rule for spouses filing jointly for 2012.
If either you or your spouse was an active participant in an employer retirement plan during 2012, the phaseout rule may limit or completely disallow an IRA deduction. However, even if one or both of you were active participants in an employer plan, the phaseout rule does not apply and you may each deduct contributions up to the $5,000 limit ($6,000 if age 50 or older) if your 2012 joint return modified adjusted gross income (MAGI) (8.4) is $92,000 or less.
If both of you were active plan participants for 2012, the deduction limit is phased out if your joint return MAGI is more than $92,000 but less than $112,000. No deduction is allowed for either of you if your 2012 joint return MAGI is $112,000 or more.
If you were not an active plan participant in 2012 but your spouse was, a different phaseout rule applies to each of you. Your spouse, as an active plan participant, is subject to the deduction phaseout if MAGI on the joint return is between $92,000 and $112,000; no deduction is allowed if MAGI is $112,000 or more. However, as the nonparticipant spouse, your deduction limit is not subject to phaseout unless MAGI on the joint return is over $173,000. Your deduction is phased out if joint MAGI is between $173,000 and $183,000, and no deduction is allowed if MAGI is $183,000 or more.
Planning Reminder
See 8.4 for an example of how the reduced deduction limit is figured if MAGI is within the above phaseout ranges.
Deduction phaseout rule for married persons filing separately for 2012.
If you are married, live together at any time during 2012, file separately, and either of you is an active participant in an employer plan, the other spouse is also considered an active participant. Both of you are subject to the $0 to $10,000 MAGI deduction phaseout (8.4).
If you live apart for all of 2012, you each figure IRA deductions as if single. Thus, the more favorable deduction phaseout range of $58,000 to $68,000 applies if you are covered by an employer retirement plan (8.4). If you are not covered, you may claim a full deduction on your separate return.
Contribution for nonworking spouse under age 70½.
If in 2012 you were age 70½ or over and had taxable compensation, you may contribute to a spousal IRA for 2012 if your spouse is nonworking and is under age 70½ at the end of the year. The entire contribution must be allocated to the nonworking spouse. No contribution may be made to your own traditional IRA for the year in which you reach age 70½, or any later year. However, you may contribute to a Roth IRA even if you are over age 70½, provided your compensation is within the Roth IRA limits (8.20).