You can contribute to an IRA if you earn income from a job or from running your own business, and under certain circumstances, you can even fund an IRA if you’re not working at all. Many couples agree that one spouse will stay home with the children while the other one works. Thus, the current law allows the non-earning spouse to contribute to an IRA under certain conditions. Here’s what you need to know:
- Your earned income must be at least as great as your total contributions. If you are contributing to IRAs for yourself and your spouse, your income must equal or exceed the amount of your contributions.
- If you and/or your spouse are under the age of 50, you can each contribute up to $6,000 in 2019 and 2020, assuming your income is at least that much. If you are at least 50, you can contribute as much as $7,000.
- You can make a 2019 contribution to your traditional IRA up until the tax deadline. Also, you might be able to take a tax deduction on your 2019 taxes but be sure to tell your plan administrator that your contribution is for 2019. *Note, because the Treasury extended the the tax deadline for filing federal income tax returns to July 15, 2020, the deadline for making 2019 IRA contributions was also extended to July 15,2020.
- Your IRA contribution may not be fully deductible. If neither you nor your spouse is covered by an employer-sponsored retirement plan, these rules do not apply to you. However, if the working spouse is covered by a retirement plan at work, then your combined income must be under $103,000 in 2019 for you to get a full deduction for your contributions. You can earn up to $122,000 and get a partial deduction, but if your combined income is $123,000 or more, your IRA contributions are not deductible.
- If you’d like to contribute to a non-deductible Roth IRA, your combined income must be under $203,000 in 2019 ($206,000 in 2020). For traditional IRAs, there is no similar compensation limit.
- If you make nondeductible contributions to your IRA, when you retire you’ll be able to recoup those deductions tax-free, since you didn’t get a deduction for them when they were made.
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