Spousal IRA

If you are employed and have a non-working spouse or one who has little or no income, you might be allowed to set up and contribute to an IRA for that spouse.

You must be legally married at the end of the tax year and file a joint income tax return. You must also be employed and have an earned income of at least the amount you contribute to the IRA. If you plan to open a traditional IRA, he or she must be under the age of 70 ½. If you plan to open a Roth IRA, there are no age limits.

For years 2006 and 2007, you can contribute the lesser of your earnings or $4000 to a spousal IRA.

For 2008, you can contribute the lesser of your earnings or $5000 to a spousal IRA. If your spouse is 50 years old or over, an additional $1000 for years 2006 through 2008.

If you aren't covered by a retirement plan where you work, you will be able to deduct the full amount of your spousal traditional IRA from your income tax return. If you are covered by a retirement plan, your spousal IRA is fully deductible if your AGI is less than $150,000 and partially deductible if between $150,000 and $160,000. For a Roth IRA, your earnings cannot be more than $160,000 to contribute to a spousal IRA.

You can be the beneficiary of the spousal account but it must be established in your spouses name only. Joint accounts are not allowed even though you are making the contribution.