If you were married as of the last day of the year, the Internal Revenue Service considers you married for the whole year for tax purposes. You have the option of filing your tax return either jointly or separately. Most married couples will have a lower combined tax obligation by filing a joint return, and by combining your incomes, you might be able to contribute a larger amount to your Roth IRA.
A Roth individual retirement arrangement is similar to a traditional IRA in that investments held in the account grow tax deferred, but there are some significant differences. You can't deduct contributions you make to your Roth IRA, but qualified withdrawals are completely free from federal income taxes. Your eligibility to contribute to a Roth IRA depends on the amount of your earned income. If you are married and file a joint return, you can draw on your spouse's income to qualify for a Roth IRA, even if you do not have earned income.
The maximum contribution you can make to a Roth IRA for the 2012 tax year is $5,000 per year, or $6,000 if you are at least 50 years old, but your contribution is limited to the amount of your earned income. For example, if you have $10,000 in interest income and your spouse had $8,500 in income from wages, your total combined taxable compensation would be $18,500. The maximum amount available for contribution to your Roth IRAs would be $8,500. The maximum amount that you could contribute to one spouse's Roth IRA would be $5,000, assuming you are both under 50, and the remainder could be contributed to the other spouse's IRA. As long as you don't exceed the $5,000 maximum you can divide the amount between the two Roth IRAs any way you wish. For example, you could both contribute $4,250 to your individual accounts.
When you file your taxes using the married filing jointly status your ability to contribute to a Roth IRA is based solely on your combined earned income. It doesn't matter if both spouses had earned income, if one spouse had significantly higher income or if one spouse had no income. There is no requirement that the spouse who produced the income use that income to fund the other spouse's Roth IRA. As long as you meet the qualifications for contributing to a Roth IRA it does not matter what source you use to fund your Roth IRA. For example, if your spouse earned $70,000 in taxable compensation, and you received $10,000 in dividend income, you can both contribute up to $5,000 each to your Roth IRAs. Your spouse could fund his Roth IRA from his $70,000 and you could fund your Roth IRA using your dividend income.
Your ability to contribute to a Roth IRA may be reduced or eliminated based on your modified adjusted gross income. Your modified AGI is your adjusted gross income, the amount on Line 37 of your Form 1040, plus certain deductions that you must add back in, such as amounts you deducted for traditional IRA contributions, deductions for student loan interest and adoption benefits from an employer. If you are married and file a joint return, you can contribute up to the maximum allowed by law if your modified AGI is $173,000 or less. If your modified AGI is $183,000 or more you cannot contribute to a Roth IRA. If your modified AGI is between those figures your maximum contribution will be reduced. IRAs are, by definition, individual. You cannot have a joint Roth IRA with your spouse.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.