Marriage Changes IRA Account Limits

Marriage changes IRA account income limits. It is important to keep these in mind, especially as they are changing in the first year of marriage.

Interestingly, the income limits for a married couple are not double those of single people.

Traditional IRA tax deductibility

As discussed in a previous post, a traditional IRA is a special type of account that provides certain tax benefits to people saving for retirement. In certain circumstances, contributions can be tax-deductible. However, tax-deductible contributions will eventually be taxed when withdrawn.

Marriage changes the limits for determining if a traditional IRA contribution is deductible or not. Here are the rules for tax-year 2023:

If filing with single filing status, a traditional IRA contribution is fully deductible if:

• Account holder is not covered by a retirement plan at work.

OR

• Account holder’s modified adjusted gross income (MAGI) is below $73,000 (phasing to $83,000).

If filing with married filing jointly status, a traditional IRA contribution is fully deductible if:

• Account holder and their spouse are not covered by retirement plans at work.

OR

• Account holder is covered by a retirement plan at work and MAGI is below $116,000 (phasing to $136,000).

OR

• Account holder is not covered by a retirement plan at work, but their spouse is covered by a retirement plan at work, and MAGI is below $218,000 (phasing to $228,000).

You'll notice that the income limits for married filing jointly status are not simply 2x the single amount. Depending on their MAGI, a married couple may not be able to make deductible traditional IRA contributions, even though they both could if they were still single.

Roth IRA

A Roth IRA is another special type of account that provides tax benefits to people saving for retirement. A Roth IRA is funded with after-tax dollars (no immediate tax deduction is available). However, all growth in the account is tax-free and all qualified withdrawals are tax-free.

Contributions are limited to those who meet certain modified adjusted gross income (MAGI) limits. Please note that the calculation of MAGI for determining Roth IRA contribution eligibility is slightly different than how MAGI is calculated for traditional IRA deduction eligibility.

The MAGI limits to make a full Roth IRA contribution differ based on filing status:

• $138k for those filing with single filing status (phasing to $153k).

• $218k for married filing jointly filing status (phasing to $228k).

You’ll notice that the joint limit is 1.58x the individual limit (not 2x, as you might expect).

If you have any comments, questions, or ideas for future posts, please let me know

I hope you found this post helpful and educational. If you have any comments, questions, or ideas for future posts, please let me know. You can reach me directly via email at crawford@ulmerfinancial.com.