Tax Filing - Ira Spousal Contribution Benefit
Hopeless romantics listen up! Being married has long-term benefits that single people just don't get, Spousal IRA Contributions. Okay, so it's not exactly romantic but married people live longer then single people and married people can have better retirements too. Married couples who file a joint tax return may take advantage of Spousal IRA Contributions.
The Spousal IRA Contribution rule allows an individual to include their spouse's income as their own for the purpose of determining IRA contribution limit. This comes in handy when one spouse is employed and the other is not or does not have enough income to make the maximum IRA contribution allowable.
The IRS has different IRA limits based on age, individuals under 50 are allowed a maximum contribution of $5,000 and individuals over 50 are allowed a $6,000 annual contribution. These amounts are subject to the income requirement that the contribution can not be greater then their total earned income, generally speaking income from employment.
This brings us to the good news for married people who file a joint tax return; filing jointly is required in order to be able to use this benefit. A couple, Joe who is 43 and Sarah 42 are married. Joe went back to school full-time in March and only earned $3,500 for the year. Sarah is a physical therapist who earns $45,000 a year.
Based on her age and income Sarah is allowed to contribute a maximum of $5,000 to her IRA. If Joe were single he would only be able to contribute $3,500 to his IRA. Fortunately for Joe he is married and thanks to the Spousal IRA Contribution rule is able to include Sarah's income (after her IRA Contribution) of $40,000 as his own and is now entitled to make a maximum contribution of $5,000 to his IRA.
Joe's sister Jean is 53 and married to Henry also 53. Henry is a master plumber who earns $76,000 from his job with Acme Plumbing. Jean is a stay at home mother. Because of his age and income Henry is able to contribute $6,000 to his IRA. As his wife Jean is able to include $71,000 of Henry's income as her own and may also put $6,000 into her IRA.
Other IRS rules regarding IRA contributions are the same regardless of marital or filing status. These rules and regulations include when you can make your IRA contribution. The deadline in any tax year is the filing deadline, usually April 15th for you to make your contribution. This only means that this is the last date you can add funds for a given year. You are allowed to make contributions throughout the year but your last deposit must be by the filing deadline.
In the event you do not contribute the maximum by the filing deadline you will not be allowed add more for that tax year. The IRS however does allow you to contribute more then the maximum amount in any given year and apply that overage in a future year provided that it does not cause that future year to exceed the maximum allowable.
If you are unsure about how to proceed or what is allowable and when check with a reputable CPA or tax professional because penalties and additional tax may be due as a result of improper IRA contributions.
The Spousal IRA Contribution rule allows an individual to include their spouse's income as their own for the purpose of determining IRA contribution limit. This comes in handy when one spouse is employed and the other is not or does not have enough income to make the maximum IRA contribution allowable.
The IRS has different IRA limits based on age, individuals under 50 are allowed a maximum contribution of $5,000 and individuals over 50 are allowed a $6,000 annual contribution. These amounts are subject to the income requirement that the contribution can not be greater then their total earned income, generally speaking income from employment.
This brings us to the good news for married people who file a joint tax return; filing jointly is required in order to be able to use this benefit. A couple, Joe who is 43 and Sarah 42 are married. Joe went back to school full-time in March and only earned $3,500 for the year. Sarah is a physical therapist who earns $45,000 a year.
Based on her age and income Sarah is allowed to contribute a maximum of $5,000 to her IRA. If Joe were single he would only be able to contribute $3,500 to his IRA. Fortunately for Joe he is married and thanks to the Spousal IRA Contribution rule is able to include Sarah's income (after her IRA Contribution) of $40,000 as his own and is now entitled to make a maximum contribution of $5,000 to his IRA.
Joe's sister Jean is 53 and married to Henry also 53. Henry is a master plumber who earns $76,000 from his job with Acme Plumbing. Jean is a stay at home mother. Because of his age and income Henry is able to contribute $6,000 to his IRA. As his wife Jean is able to include $71,000 of Henry's income as her own and may also put $6,000 into her IRA.
Other IRS rules regarding IRA contributions are the same regardless of marital or filing status. These rules and regulations include when you can make your IRA contribution. The deadline in any tax year is the filing deadline, usually April 15th for you to make your contribution. This only means that this is the last date you can add funds for a given year. You are allowed to make contributions throughout the year but your last deposit must be by the filing deadline.
In the event you do not contribute the maximum by the filing deadline you will not be allowed add more for that tax year. The IRS however does allow you to contribute more then the maximum amount in any given year and apply that overage in a future year provided that it does not cause that future year to exceed the maximum allowable.
If you are unsure about how to proceed or what is allowable and when check with a reputable CPA or tax professional because penalties and additional tax may be due as a result of improper IRA contributions.
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