Spousal IRA

[Guest kr402]

For 2003, on a Spousal IRA, is the full amount of the contribution, up to $3,000, deductible, when spouse is covered by a Retirement Plan at work, 401K?

[jevd]

It depends on the AGI & Filing status of the couple.

See Pub IRS 590 for a complete explanation.

Found at IRS.gov

http://www.irs.gov/pub/irs-pdf/p590.pdf

[Guest kr402]

jevd, thanks for your reply.

Our filing status is married filing jointly.

I've looked at the Pub 590, at the IRS website, it's for 2002, I didn't know if the rules are the same for 2003. Also, some of the information isn't very clear.

Page 15, table1-3, married filing jointly with a spouse who's covered by a plan at work and your modified AGI is less than $150,000 then you can take a full deduction.

My husband makes less than $150,000, so that means I should be able to take a full deduction on a Spousal IRA. I'll contact our CPA to check that the rules are the same for 2003.

[Appleby]

kr402,

For your category ( married filing jointly) , the figure remains at $150,000 for 2003. Therefore, if you and your husband’s combined adjusted gross income is less than $150,000 ( you must also include your income, if any), then a traditional IRA contribution made to your IRA is fully deductible…that is assuming that you are not a participant in an employer sponsored plan.

[Guest kr402]

Appleby,

Thanks for your reply.

I don't have any income of my own, that's why it would be a Spousal IRA. I don't have an employer sponsored plan, since I'm not employed, but my husband's employer offers a Retirement Plan, a 401K.

[Appleby]

I don't have any income of my own, that's why it would be a Spousal IRA. I don't have an employer sponsored plan, since I'm not employed, but my husband's employer offers a Retirement Plan, a 401K.

You’re welcome kr402,

That’s what I suspected. A point of clarification… a spousal IRA contribution can be made on behalf of a non-working spouse as well as a working spouse. Generally, a spousal IRA contribution is made on behalf of a spouse who has little or no income.

Note also that a spouse could be an active participant in a plan even if he/she was not employed for the year. For instance, some employers do not make plan contributions for a year until the following year. An individual may not be an employee in that following year, but because he/she received a contribution in that year, he/she is considered covered by the plan and is therefore an active participant for that year.

Example:

Jane was employed by ABC Company from 1998 to 2002.

ABC Company decided to make a profit sharing contribution for year 2002 to each eligible employee, which includes Jane. ABC made their 2002 profit sharing contribution in May of 2003. Although Jane was unemployed during 2003, she is still considered an active participant for 2003, because her employer credited her account with her contribution during 2003.

Because Jane is an active participant for 2002, assuming she files a joint tax return , her modified adjusted gross income, for purposes of deducting an IRA contribution is $60,000 not $150,000