If you’re married, you can file a joint tax return with your spouse or file separate returns. If your incomes are similar and you’re worried about moving into a higher tax bracket, it can make sense to file separately. It might also be a good idea if one of you normally claims a significant amount of miscellaneous deductions.
Filing a separate return can save you money at tax time, but it could affect your ability to save for retirement in an individual retirement account (IRA). If you’re married and file separately, here’s what you need to know about making IRA contributions.
- Traditional and Roth IRAs are a tax-advantaged way to save for retirement.
- With Roth IRAs, your income, filing status, and living arrangement affect your eligibility and contribution limits.
- With traditional IRAs, the upfront tax deduction depends on your income, filing status, living arrangement, and whether you’re covered by a plan at work.
Saving in a Roth Could Be More Difficult
Roth IRAs can be a great way to save for the future while enjoying some tax advantages. With a Roth IRA, your qualified withdrawals are tax-free. That’s an advantage if you expect to be in a higher tax bracket during retirement. The annual contribution limit for a Roth IRA is $6,000 for 2021 and 2022. For those aged 50 and older, a catch-up contribution of $1,000 is allowed for each year.
Your tax-filing status, living arrangement, and income can impact your eligibility and the amount that can be contributed to a Roth IRA. The Internal Revenue Service (IRS) uses your modified adjusted gross income (MAGI), which includes deductions and any tax penalties. The table below shows the various income and contribution limits for a Roth IRA, based on tax-filing status.
|2021 and 2022 Roth IRA Income Limits|
|Filing Status||2021 Modified AGI||2022 Modified AGI||Contribution Limit|
|Married filing jointly or qualifying widow(er)||Less than $198,000||Less than $204,000||$6,000 ($7,000 if you’re age 50 or older)|
|$198,000 to $207,999||$204,000 to $214,000||Reduced|
|$208,000 or more||$214,000 or more||Not eligible|
|Single, head of household, or married filing separately (and you didn’t live with your spouse at any time during the year)||Less than $125,000||Less than $129,000||$6,000 ($7,000 if you’re age 50 or older)|
|$125,000 to $139,999||$129,000 to $144,000||Reduced|
|$140,000 or more||$144,000 or more||Not eligible|
|Married filing separately (if you lived with your spouse at any time during the year)||Less than $10,000||Less than $10,000||Reduced|
|$10,000 or more||$10,000 or more||Not eligible|
If you’re married filing separately, the income limits are significantly different, depending on whether or not you lived together at any time during the year.
For example, if you filed your taxes as married filing separately and you didn’t live together at all, you can contribute the full amount as long as your income was less than $125,000 for the year.
However, if you filed your taxes as married filing separately and you lived together at any time during the year, the income limit is less than $10,000, meaning you can’t contribute anything if you made $10,000 or more.
A Traditional IRA May Be a Better Choice
A traditional IRA doesn’t offer tax-free withdrawals in retirement, but you do have the advantage of deducting your annual contributions. That can lower your tax liability since deductions reduce your taxable income for the year. The annual contribution limit for a traditional IRA is $6,000 for 2021 and 2022. A $1,000 catch-up contribution is allowed each year for those aged 50 and older.
You may be able to take the deduction if you’re married filing separately. But it depends on your income, your living arrangement, and whether you’re covered by a retirement plan at work.
Covered by a Work Plan
As shown in the table below, the amount you can deduct in traditional IRA contributions hinges on whether you filed your taxes as “single,” “married filing jointly,” or “married filing separately,” and your income level.
|2021 and 2022 Traditional IRA Deduction Limits|
|Filing Status||2021 Modified AGI||2022 Modified AGI||Deduction|
|single or head of household||$66,000 or less||$68,000 or less||a full deduction up to the amount of the contribution limit|
|more than $66,000 but less than $76,000||more than $68,000 but less than $78,000||a partial deduction|
|$76,000 or more||$78,000 or more||no deduction|
|married filing jointly or qualifying widow(er)||$105,000 or less||$109,000 or less||a full deduction up to the amount of the contribution limit|
|more than $105,000 but less than $125,000||more than $109,000 but less than $129,000||a partial deduction|
|$125,000 or more||$129,000 or more||no deduction|
|married filing separately||less than $10,000||less than $10,000||a partial deduction|
|$10,000 or more||$10,000 or more||no deduction|
For example, let’s say you and your spouse entered into a divorce decree, resulting in you filing as “single.” If your 2021 modified adjusted gross income was $66,000 or less, you could take the full tax deduction up to the annual contribution limit.
If in 2021, you earned between $66,000 and $76,000, you’d be eligible for a partial deduction, and you wouldn’t be able to deduct any of your contributions if you earned $76,000 or more in 2021.
If you and your spouse filed as “married filing separately,” the income limits for taking the deduction are much lower. You can snag a partial deduction if your modified adjusted gross income is less than $10,000. But no deduction is allowed if your income is above that amount.
Not Covered by a Work Plan
The deduction rules are similar for couples who file separately and aren’t covered by a retirement plan at work. What’s different are the income limits for couples who file separately and live apart. In that scenario, you can take the full deduction, up to the annual contribution limit, regardless of how much you make.
If, however, you file separate returns, live together, and your spouse is covered by a retirement plan at their job, you’re only eligible for a partial deduction, assuming your modified adjusted gross income is less than $10,000. Again, if your income is over $10,000, you can’t take any deduction at all.
The Bottom Line
The fact that you’re married filing separately may affect whether you can deduct traditional IRA contributions. But it doesn’t bar you from making them. If you’re set on filing separate returns and your income is too high to contribute to a Roth, you may have to opt for contributing to a traditional IRA instead and taking a partial or even no deduction.
Talking with a tax or financial professional can help you determine whether filing separate returns makes sense and which IRA is the right fit.