Many couples assume that if one spouse doesn’t earn income, they’re ineligible to contribute to an IRA. Fortunately, that’s not the case. With a spousal IRA, a working spouse can make retirement contributions on behalf of a non-working or lower-earning spouse. This strategy not only boosts household retirement savings but can also significantly reduce overall tax liability. In this detailed guide, we’ll explain how spousal IRAs work, their eligibility rules, tax benefits, and how to use them strategically to minimize your family’s tax burden while building long-term wealth.
What Is a Spousal IRA?
A spousal IRA isn’t a special type of IRA—it’s a standard Traditional or Roth IRA funded on behalf of a non-working or low-income spouse. The key difference is that the contribution is made based on the working spouse’s income, not the account holder’s own earnings.
This provision enables couples to double their IRA contributions each year—even if only one spouse earns income—thereby increasing their tax deductions and retirement assets.
Who Is Eligible for a Spousal IRA?
To qualify for a spousal IRA contribution, you must meet the following criteria:
- You are married and file a joint tax return (required).
- One spouse has earned income (e.g., wages, self-employment income).
- The other spouse has little or no earned income.
- The total contribution for both spouses must not exceed the total household earned income.
Each spouse must have their own IRA account; the working spouse cannot contribute to their own account for both spouses. Instead, one contribution goes to each account separately.
Contribution Limits for 2025
The IRS sets annual contribution limits for IRAs. For tax year 2025:
- Under age 50: $7,000 per person
- Age 50 or older: $8,000 per person (includes $1,000 catch-up)
This means a couple can contribute up to $14,000 or $16,000 combined, depending on their ages, even if only one spouse works. These contributions can be made up until the tax filing deadline, typically April 15 of the following year.
Traditional vs. Roth Spousal IRA
Traditional Spousal IRA
Contributions may be tax-deductible, reducing your household’s taxable income. Whether you can deduct contributions depends on your modified adjusted gross income (MAGI) and whether the working spouse is covered by a retirement plan at work.
Deduction Limits (2025, if covered by a workplace plan):
- Full deduction if MAGI ≤ $116,000 (married filing jointly)
- Partial deduction if MAGI is between $116,000–$136,000
- No deduction if MAGI ≥ $136,000
Roth Spousal IRA
Contributions are not deductible, but earnings grow tax-free, and qualified withdrawals in retirement are also tax-free.
Contribution Eligibility (2025):
- Full contribution if MAGI ≤ $230,000
- Phase-out between $230,000–$240,000
- No contribution allowed if MAGI ≥ $240,000
How Spousal IRAs Reduce Taxable Income
When contributing to a Traditional IRA, your contribution may reduce your taxable income, lowering your total household tax liability. For example:
Example: A married couple has $90,000 in MAGI. Only the husband earns income. By contributing $7,000 each to a Traditional IRA and spousal IRA, they reduce their taxable income to $76,000, potentially saving hundreds or even thousands in taxes depending on their tax bracket.
This deduction can also make them eligible for other tax credits or deductions phased out at higher incomes, such as the child tax credit or education credits.
How to Set Up a Spousal IRA
Setting up a spousal IRA is simple. Here are the steps:
- Open two separate IRA accounts—one for each spouse—with a bank, brokerage, or robo-advisor.
- Designate the account for the non-working spouse as a Traditional or Roth IRA.
- Make contributions before the tax deadline for the applicable year.
- Retain documentation showing that contributions were made by the working spouse on behalf of the other.
Most platforms will clearly label accounts as “Spouse 1” and “Spouse 2” and allow easy designation of contribution sources.
Can You Contribute to Both a Spousal IRA and a 401(k)?
Yes. A working spouse can contribute to a 401(k) or other workplace plan and still fund both their own IRA and their spouse’s IRA. However, income limits may restrict deductibility or Roth eligibility, especially if the working spouse is covered by a retirement plan.
Strategically, you might:
- Max out the 401(k) up to the employer match
- Contribute to both IRAs (Traditional or Roth)
- Return to the 401(k) for additional contributions if income permits
Required Minimum Distributions (RMDs)
Traditional IRA account holders must begin taking RMDs at age 73. This applies to both spouses’ IRAs, even if one spouse never worked. Roth IRAs, however, do not require RMDs during the account owner’s lifetime.
If you use spousal IRAs as part of your long-term retirement plan, consider using Roth IRAs to avoid RMDs and gain more flexibility in retirement income planning.
Spousal IRA and the Saver’s Credit
Contributions to a spousal IRA can also help you qualify for the Saver’s Credit—a tax credit of up to $1,000 per spouse (or $2,000 per couple).
Eligibility (2025):
- Married filing jointly with MAGI ≤ $76,500
- Credit is worth 10%, 20%, or 50% of contributions depending on income
Because this is a credit—not a deduction—it directly reduces your tax owed and can be a powerful incentive for lower-income households to contribute.
Common Mistakes to Avoid
- Not filing a joint return—required for spousal IRA eligibility
- Exceeding contribution limits based on household income
- Confusing IRA ownership—each spouse must have their own IRA
- Missing contribution deadlines (typically April 15 of the following year)
- Failing to consider income limits for Roth IRAs or deductibility for Traditional IRAs
Tax Reporting for Spousal IRA Contributions
Report IRA contributions on Form 1040, Schedule 1 (Line 20) if you’re claiming a deduction for Traditional IRA contributions. Also, ensure you and your spouse each receive Form 5498 from your IRA custodian, showing the amount contributed for the tax year.
If contributions are non-deductible (e.g., a Roth or non-deductible Traditional IRA), track basis using Form 8606 to avoid double taxation upon withdrawal.
Final Thoughts
A spousal IRA is a smart, legal, and IRS-approved way to build retirement savings and reduce taxable income—even when one spouse doesn’t work. It allows families to fully leverage both spouses’ annual contribution limits, maximize deductions, and ensure that both partners have individual retirement resources. Whether you choose a Traditional IRA for upfront tax savings or a Roth IRA for tax-free growth, using a spousal IRA can be a powerful strategy in your household’s long-term financial plan. Be sure to review eligibility requirements each year and consult a tax advisor if you’re unsure which type of IRA best fits your situation.
