Yahoo Finance You Can Still Double Your Retirement Tax Breaks — Here’s How
Choosing “Married Filing Jointly” on their tax returns this year may help married couples make the most of their IRA contributions, even if one spouse is earning less than their partner or nothing at all.
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According to the Wall Street Journal (WSJ), “Eligible couples can use it to double contributions to traditional individual retirement accounts (IRAs) and deduct $15,000 rather than $7,500 for 2023, as long as they do so by April 15. Or they can contribute to Roth IRAs with no deduction.”
Historically used to provide savings opportunities for an unpaid or low-earning spouse abandoning work to be a child or elder caregiver, spousal contributions have come in handy for older couples who have one partner working and the other not working or retired.
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If one spouse has earned income and the other does not, the working spouse can contribute to their own IRA and also make a separate contribution to the non-working spouse’s IRA, up to the annual limit for each.
Spousal contributions reduce reported income, enabling couples to also benefit from savings elsewhere on their tax filings, on things like property tax and investment income limitations, for example. But they are subject to income thresholds.
Traditional spousal IRA contributions are fully or partially deductible based on a couple’s modified adjusted gross income (MAGI) and whether or not one or both spouses contribute to a workplace retirement plan.
Whether either spouse actively participates in a workplace retirement plan, like a 401(k) or a SIMPLE IRA, matters. The income limit for spouses not participating in employer-sponsored retirement plans is $228,000 for 2023 and $240,000 for 2024. The deduction phases out at $136,000 for 2023 and $143,000 for 2024 for active plan participants.
“If both spouses actively participate in a retirement plan, then both are subject to the phase-out ending at $136,000 for 2023 and $143,000 for 2024,” states WSJ.
Age is a factor too. IRS rules dictate that the total combined contributions to your IRA and your spouse’s IRA, cannot exceed $13,000 for the 2023 tax year if only one of you is age 50 or older. The total contributions cannot exceed $15,000 if both of you are at least 50 years old ($16,000 for 2024).
The IRS started receiving 2023 federal tax returns on Jan. 29 and will continue until the deadline of Apr. 15 (Apr. 17 for taxpayers in Maine and Massachusetts, who will be observing Patriot’s Day and Patriots’ Day, respectively, on the third Monday in April). IRS Publication 590-A outlines all rules pertaining to spousal IRA contributions.
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This article originally appeared on GOBankingRates.com: You Can Still Double Your Retirement Tax Breaks — Here’s How
