Contributions to IRA accounts for 2010 and 2011 are subject to an annual limit of $5,000 for all taxpayers under age 50. (The IRA contribution limits for 2011 are the same as the IRA contribution limits for 2010.) IRA owners over age 50 can contribute an additional $1,000 catch-up contribution to their IRA account for a total contribution of $6,000 per year.
Contributions must come from taxable income. In other words, a parent cannot contribute to an IRA on behalf of a child with no earned income.
For couples who file jointly, there is an exception called a spousal IRA. A spousal IRA allows one spouse to contribute to the other spouse’s IRA up to the yearly IRA contribution limits for 2010 or 2011.
If Bob makes $100,000 and Betty makes $2,000, typically, Bob could contribute $5,000 to an IRA and Betty could contribute just $2,000. However, if the couple is married filing jointly, a full $5,000 contribution can be made to Betty’s IRA by the couple.
If Betty is over age 50, a catch-up contribution is allowed to spousal IRA as well, so $6,000 can be contributed to the spousal IRA for 2010 and also contributed for 2011.
If One Spouse Is Over 50 Can There Be a Catch-Up Contribution to a Spousal IRA?
A question that often comes up is, what happens if one of the couple is over age 50. Who can make a catch-up contribution when one spouse is over age 50?
The answer is that the age of the IRA account holder is what matters, not who has the regular IRA and who has the spousal IRA. If Betty is over 50 and Bob is under 50, a catch-up contribution can be made to Betty’s IRA but not to Bob’s IRA, no matter who has the higher income.
Can A Spousal IRA Be a Roth IRA?
A spousal IRA can be a Roth IRA or a spousal IRA can be a traditional IRA. However, the same rule that applies to all IRA contribution limits is that the annual contribution limit for 2010 and beyond applies cumulatively to both types of IRA account.
For example, if Bob has both a Roth IRA and a traditional IRA, then he can contribute a total of $5,000 across both accounts ($6,000 if he is over age 50.) Therefore, he can contribute $3,000 to the Roth IRA and $2,000 to the traditional IRA, or any other combination so long at the two IRA accounts together have contributions of $5,000 or less.
However, Bob’s contributions have no affect on the spousal IRA of Betty. Regardless of how Bob contributes to one or both of his IRA accounts, Betty can contribute any combination of the maximum IRA contribution limit to her accounts.