A married couple where one spouse is employed can have two IRAs. Moreover, the non-working spouse may deduct his or her $2,000 contribution.
This deduction is permitted if the couple’s adjusted gross income (AGI) is below $150,000. There’s a phase-out range up to $160,000 in AGI.
Suppose, for example, that John Smith retires at age 65. His wife Mary is still working for the federal government.
If the couple’s AGI is under $150,000, John can deduct his $2,000 IRA contribution. With an AGI of $154,000, they’re 40% through the phase-out range so 60% of his maximum $2,000 contribution ($1,200) could be deductible. Over $160,000 in AGI, no deduction would be allowed.
With $154,000 in AGI, John could simply make a $1,200 deductible IRA contribution. He could contribute up to $2,000 but the excess over $1,200 would not be deductible. However, the entire amount (deductible and non-deductible) would qualify for tax-deferred buildup.
