Withdrawal of spousal TIRA in the same year it was opened
For Missouri state income tax purposes, it is better for both spouses to have some taxable income, rather than one spouse having all of the taxable income. Would there be anything wrong with opening a spousal Traditional IRA in 2021 and then withdrawing the money from that IRA prior to the end of 2021? This would create some taxable income for the spouse. We are both over age 59 1/2 and our credit union does not impose a “substantial penalty for early withdrawal” from an IRA if you are over age 59 1/2. Thank you.
Permalink Submitted by Alan - IRA critic on Mon, 2021-09-20 03:16
This would create taxable income reported under the spouse’s SSN, however if the contribution is deductible then the deduction will offset the taxable income on a joint return. You would need to determine if the deduction has any effect on the benefit of the taxable distribution. It also requires earned income from at least one spouse in order to make a spousal contribution.