The general rule is that you may only contribute to an individual retirement account, if you have earned income from either a job or from self employment. However, there is an exception for a now working taxpayer who files a joint tax return with a working spouse. In this situation both the employed and the unemployed taxpayer may take the IRA deduction.
The maximum deduction for an IRA contribution in 2011 is $5,000 per taxpayer, with an additional $1,000 available if the taxpayer is over age 50. No deduction is available for taxpayers over the age of 70 ½. Thus in the case of married taxpayers where only the husband or the wife works a total of $10,000 is available as an IRA deduction ($12,000 if both spouses are over the age of 50).
As an estate planning attorney I often see cases, where this presents a great planning opportunity, if one spouse is retired and the other continues to work. Since either the husband or wife is still working, a $12.000 deduction is available, and if one of them can afford to retire before the age of 70 ½ they often have some savings that could painlessly be transferred to an IRA.
No comments:
Post a Comment