The Kay Bailey Hutchison Spousal IRA: what a mouthful! We now have this thanks to a bill that was signed into law on July 25, 2013 that renamed the section of the tax code that specifies the spousal IRA contribution limit.
Kay Bailey Hutchison was one of the sponsors of the bill that increased the spousal IRA contribution limit to equal what a working spouse can contribute to an IRA. For 2013, that amount is $5,500, but if you are 50 or older by the end of this year, you can add an additional $1,000 for a total contribution of $6,500. The working spouse’s earnings must equal or exceed the amount of all IRA contributions. If you are turning age 70 ½ this year or are older, you can’t make a contribution to your IRA, even if your spouse is still working (and even if your spouse is under age 70 ½).
Kay Bailey Hutchison did not seek reelection in 2012. Her colleagues in the Senate chose to honor her service and her dedication to women’s issues by renaming this section of the tax code. And, for whatever reason, enough members of Congress could agree on this issue to pass the bill.
Meanwhile, we have a host of issues that need to be resolved that will impact the well-being of all American citizens and, on these issues, Congress chooses to continue to posture and hold its uncompromising positions. Tax reform has been pushed off to the fall. We have major budget issues, which look like they will never be resolved. There are many, many presidential appointment positions that continually go unfilled because of Congressional actions - not inaction.
But we have the Kay Bailey Hutchison spousal IRA. On that, Congress could agree. Maybe we can build on this.
- By Beverly DeVeny and Jared Trexler
Smart money/Coming Soon
Mailbag
Thursday's Slott Report Mailbag
Consumers: Send in Your Questions to [email protected]
Q:
You recently said that a 401(k) distribution would add to your MAGI (modified adjusted gross income) for the purpose of determining if you are subject to the 3.8% healthcare surtax. What about Roth IRA distributions? Would they also count towards your total MAGI income for surtax purposes?
Thanks
A:
IRA distributions are exempt from the 3.8% surtax, but taxable distributions from IRAs can push income over the threshold amount, causing other investment income to be subject to the surtax. Because Roth IRA distributions are generally tax-free, they don’t count towards your total MAGI.
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