| How To Set Up a Spousal IRAIf 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. Here is how you set up a spousal IRA. Difficulty: Average Time Required: 2 hours Here's How:- Be sure you and your spouse meet the eligibility requirements.
- Be sure you do not exceed the compensation limits.
- Be sure you or your spouse do not exceed the age limit for a traditional IRA.
- Review the contribution limits. Make sure you take advantage of the catch-up limit if you and your spouse are over 50.
- Make sure to open the IRA in your spouse's name only with you as the beneficiary. You must also use your spouses social secuity number on the IRA.
- To take advantage of a tax deduction a spousal IRA must be opened and a contribution made before the federal income tax filing date for the tax year.
- Remember, only contributions to a traditional IRA are tax deductible up to the maximum contribution limits.
Tips:- Eligibility Requirements
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 1/2. If you plan to open a Roth IRA, there are no age limits. - Compensation Limits
For a traditional IRA, there is no limit on the amount you earn in order to contribute to a spousal IRA. For a Roth IRA, your earnings cannot be more than a specified limit to contribute to a spousal IRA. Refer to IRS Publication 590 for the compensation current limit for high income persons. - Contribution Limits
For tax year 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, you can contribute an additional an additional $1000 for years 2007 and 2008. - Deduction Limits
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 were covered by a retirement plan where you work, your deduction could be reduced. Refer to IRS Publication 590 for more information and worksheets. - Individual or Joint Account
A spousal IRA must be in your spouse's name. Joint accounts are not allowed even though you are making the contribution. You can be the beneficiary of the spousal account but it must be established in your spouse's name only.
What You Need:- A legal spouse
- An earned income
- A joint income tax return
- Age of less than 70 1/2 for a traditional IRA
- IRS Publication 590 for detailed rules and regulations
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