Can I contribute to some sort of individual retirement fund besides a 401k and deduct it against my AGI.?

Question

I'm married filing joint, my wife raises our two kids and does not work. make 85k a year. I max out my 401k -15.5k, six months into the year. I think I remember mt accountant saying I can contribute 4k to a roth and recieve a credit for my wife, but I'm wondering if I can contribute as much as 15.5k to a retirement for my wife. I might not be able to afford to but it gives me something to shoot for. It seems like I should be able too. I mean If we broke my 1 salary over two jobs we could totally do it so it seems only right since we are married filing joint. Any info is appreciated. Thanks.

Answer 1

You can't contribute the 401k maximum for your wife, but you could establish either a traditional IRA or a Roth IRA for her.

Since your spouse does not have a retirement plan at work, she can contribute $4,000 ($5,000 if she is age 50 or over) to her traditional IRA and take a tax deduction for that amount on your joint return.

In addition, since you are reducing your income by the 401k, if your Box 1 of the W-2 is below $75,000, you can contribute $4,000 (or $5,000 if age 50 or over) to your own traditional IRA and take a tax deduction. The deductibility of the IRA for you phases out between $75K and $85K, so you may be able to make a smaller deductible contribution for yourself.

Either of you could establish a Roth IRA with the same contribution limits. However, there is no tax dedution. Instead, the earnings are tax-deferred and distributions are tax-free after age 59.5 as long as the account is five years old.

Each of your contributions are limited to a maximum of $4,000 (or $5,000) for the traditional and Roth IRA combined.

Answer 2

You can contribute into an traditional IRA, but not a Roth. If you contribute to a Roth IRA you won't be able to deduct the contribution to reduce AGI. There are several things you would first need to see, for example if you are covered by a retirement plan at work your deduction can be limited. See PUB 590 Individual Retirement Arrangement for more info or you can call 1800-829-1040 IRS toll free number a representative could go to several question and let you know. The advantage of contributing to a Roth IRA is that once you start withdrawing the money at 70 1/2, it is tax free,

Answer 3

The $85,000 limit for deduction to an IRA is total modified AGI for a joint return, so whether all the income is yours or it was split between you, you still wouldn't get the deduction.

Contributions to a Roth IRA are not deductible in any case. It is also possible to make non-deductible contributions to a traditional IRA, but there is paperwork, form 8606, that has to be filed with your tax return for non-deductible contributions.