You and your spouse can each own an individual IRA to invest in for your retirement. The rules change slightly that relate to earned income and what type of investments can be made. There are always tax requirements that must be followed to keep a spousal IRA free from penalties or possible account closure. By understanding the rules, you and your spouse can build a prosperous IRA. 

IRA Contribution Limits for Spousal IRAs

The IRS has special rules when you are married and file a joint tax return each year. The income contributions that are allowed depend on the income that is earned by you and your spouse. Every person has a different financial situation and this is the reason for the strict rules. Spouses with no income have fewer restrictions.

Your spouse can contribute to an IRA using one of these two formulas.

• $5000 if under 50 years of age and no earned income

• $6000 if over 50 years of age and no earned income

The contribution amounts can be reduced if deductions were made to a Roth IRA account during the year and nondeductible contributions were made by the sole income earner.

Tax Deductions for IRA Contributions

One of the advantages to owning an IRA is the annual tax deductions that can be taken to reduce your taxable income. Since earnings are not taxed before being directly contributed, you have the option of deducting contributions during a taxable year. When an employer IRA plan is used, you may or may not be eligible to take the full contribution deduction for tax purposes. 

The calculations are based on your salary and the salary of your spouse. If your spouse earns income, there are still ways to take advantage of some deductions. If your spouse has no income, there are no special rules and you can deduct the full amount of annual contributions.

Rules for partial deduction when your spouse makes IRA contributions to an employer IRA plan:

• Annual income is higher than $90,000 but less than $110,000

• No deductions allowed when income exceeds $110,000

Additional Deductions on Income

Knowing your contribution and deduction amounts is important. You could qualify for additional deductions like brokerage fees or trustee fees that can also reduce your Adjusted Gross Income (AGI). This will lower the tax that you are required to pay during each taxable year.