Spousal IRA contribution
If one spouse has a SEP IRA and maximizes his contribution based on his self employment income, can his spouse make a deductible IRA contribution of $5,500?
If one spouse has a SEP IRA and maximizes his contribution based on his self employment income, can his spouse make a deductible IRA contribution of $5,500?
Permalink Submitted by Alan - IRA critic on Wed, 2017-04-19 17:02
It depends on their MAGI and when the SEP contribution is made. The SE spouse is a SEP participant in the year the SEP contribution was made. Therefore, if a 2016 SEP contribution is made in 2017 and no contribution was made in 2016, that spouse is not a participant for 2016. If SE spouse is a participant, then MAGI must be under 184k (2016) for the non participant spouse to deduct the entire TIRA contribution.
Permalink Submitted by Talia Pierluissi on Wed, 2017-04-19 19:13
Thanks Alan! This is very helpful! This is a client who will set up the SEP this year in 2017, and contribute for 2017 in 2018. It sounds like his wife will be able to make a deductible 2017 IRA regardless of their MAGI, but starting in 2018 it will depend on MAGI, correct?
Permalink Submitted by Alan - IRA critic on Wed, 2017-04-19 21:01
Correct, because he will be an active participant for 2018. If neither spouse was an active participant for 2017 at anytime, then a deductible TIRA contribution for both spouses can be made if there is enough taxable compensation to do so. If either one is an active participant for 2017 then the MAGI threshold applies.