Case Study 2: IRA Compensation Requirement
Gene and Sue are married and are both over 50 years old. Gene earned $70,000 and Sue earned $1,500. During the tax year, Gene contributed $3,500 to his traditional IRA and $2,000 to a Roth IRA, making his total contributions $5,500. To figure the maximum contribution to Sue's IRA, use a total compensation of $66,000 (i.e., $71,500 - $5,500). If Gene and Sue file jointly, they can contribute up to $7,000 to Sue's IRA even though her own compensation was just $1,500.
Although a person may have IRAs with several different financial institutions, the tax law treats all of a taxpayer's traditional IRAs as one single IRA.