The deadline for individuals to file their 2017 income tax returns is approaching, and so too the deadline to make a contribution to an IRA account and receive a deduction for 2017. An often overlooked but important retirement planning tool is the spousal IRA (both traditional and Roth). The spousal IRA is designed to allow a working spouse to make a contribution to an IRA for their spouse who has little or no income.

The maximum contribution amount for 2017 to a spousal IRA is $5,500 for spouses under age 50, and $6,500 for those 50 and older. The contribution must be made in cash, and it can be made up to the tax filing deadline, April 17, 2018, in order to take a contribution deduction on a 2017 income tax return.

To qualify, the spouses must be legally married and file a joint tax return. The spousal IRA account must be owned in the name of the spouse for whom the contribution is being made, and the spouse making the contribution must have greater compensation than the spouse for whom the contribution is being made.

For a traditional spousal IRA, No contribution may be made to a traditional spousal IRA for the year in which the account owner turns age 70½.  Contributions may be tax deductible depending upon whether the spouse for whom the contribution is made is covered by an employer sponsored retirement plan, and the spouses’ combined incomes.

For a Roth spousal IRA, contributions are not tax deductible. Furthermore, there are income limits for making contributions to a Roth spousal IRA. Unlike with a traditional spousal IRA, contributions can be made to a Roth spousal IRA after the account owner turns age 70½.

In situations where only one spouse is working, or where one spouse has minimal income, a spousal IRA is a great way for a married couple to ramp up their tax deferred savings to secure a more comfortable retirement.

As with all types of retirement accounts, many other rules apply to spousal IRAs, both traditional and Roth. Care must be taken before making a contribution to either type of spousal IRA. As always, you should work with a competent professional.

Struggling with your own retirement planning? Call me, I can help.