Newly married, want to ascertain we understand rules re: HSA and IRAs

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InvisibleAerobar
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Newly married, want to ascertain we understand rules re: HSA and IRAs

Post by InvisibleAerobar » Tue Jan 14, 2020 1:45 pm

Two (hopefully) simple issues on which I would like clarification.

We married last year, and my wife is currently in a 4-yr professional program. She will have the opportunity to work during the summer, which is the source of her potential income, although I would hazard that it won't exceed $6k gross. It's also highly unlikely that she would be offered the opportunity to participate in a company-sponsored retirement savings plan, alas IRAs.

My gross income is otherwise ~$135k. I contribute the maximal amount to pre-tax TSP and to Roth IRA, and we have GEHA HDHP. Her tuition is covered.

First issue is re: IRA. Assuming that her workplace (in the summer) does not offer company-sponsored retirement plan, is she limited to only Roth IRA or could she contribute to a traditional IRA? I somehow had this notion that traditional IRA contributions are no longer tax deductible past MAGI of ~$65k, but I cannot find a link supporting this. If, on the off chance, that her workplace does offer company-sponsored retirement plan, am I correct to assume that she would be eligible to open a Roth IRA as well? Lastly, as it is possible that her net earning would not exceed the Roth contribution limit, would the contribution be limited to her net earning, or would it remain the statutorily set limit (as in, I can funnel additional $ into her Roth IRA)?

Second issue is re: HSA. Last year, I contributed the maximal to HSA (via payroll deduction). Uncle Sam has already kindly doubled to the employer contribution; would I be correct to assume that I can double the personal contribution (from $2500/yr to $5000/yr) as well? Also, the additional contribution is collectively pooled into one account, which I assume is the correct set-up (as opposed to two separate HSA, one for each)?

Many thanks in advance!

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Meg77
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Re: Newly married, want to ascertain we understand rules re: HSA and IRAs

Post by Meg77 » Tue Jan 14, 2020 3:42 pm

Your spouse should be able to contribute the full $6000 to a Traditional or Roth IRA via a the spousal ira contribution rules.
If you file a joint return, you may be able to contribute to an IRA even if you did not have taxable compensation as long as your spouse did. The amount of your combined contributions can't be more than the taxable compensation reported on your joint return. See the formula in IRS Publication 590-A.
https://www.irs.gov/retirement-plans/pl ... ion-limits

https://www.investopedia.com/retirement ... ributions/

The deductibility limits for Traditional IRAs are above what you guys will make, so a traditional IRA contribution should be fully deductible for either of you. The deduction starts to phase out when MAGI hits $196K in 2020. I recommend she contribute to a Roth though.
https://www.irs.gov/retirement-plans/pl ... an-at-work

Your family HSA contribution limit is $7000 for 2019 and $7100 for 2020. You can contribute half that amount to two separate HSAs or the full amount to one HSA in one of your names (which is a lot simpler and is what we do).

https://www.cnbc.com/2019/06/03/these-a ... -2020.html
Last edited by Meg77 on Tue Jan 14, 2020 3:46 pm, edited 1 time in total.
"An investment in knowledge pays the best interest." - Benjamin Franklin

SemiRetire
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Re: Newly married, want to ascertain we understand rules re: HSA and IRAs

Post by SemiRetire » Tue Jan 14, 2020 3:44 pm

Keep all qualified medical expenses receipts forever. You can reimburse yourself at anytime for them tax free.

sailaway
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Re: Newly married, want to ascertain we understand rules re: HSA and IRAs

Post by sailaway » Tue Jan 14, 2020 3:53 pm

Meg77 wrote:
Tue Jan 14, 2020 3:42 pm
Your spouse should be able to contribute the full $6000 to a Traditional or Roth IRA via a the spousal ira contribution rules.
If you file a joint return, you may be able to contribute to an IRA even if you did not have taxable compensation as long as your spouse did. The amount of your combined contributions can't be more than the taxable compensation reported on your joint return. See the formula in IRS Publication 590-A.
https://www.irs.gov/retirement-plans/pl ... ion-limits

https://www.investopedia.com/retirement ... ributions/

The deductibility limits for Traditional IRAs are above what you guys will make, so a traditional IRA contribution should be fully deductible for either of you. The deduction starts to phase out when MAGI hits $196K in 2020. I recommend she contribute to a Roth though.
https://www.irs.gov/retirement-plans/pl ... an-at-work

Your family HSA contribution limit is $7000 for 2019 and $7100 for 2020. You can contribute half that amount to two separate HSAs or the full amount to one HSA in one of your names (which is a lot simpler and is what we do).

https://www.cnbc.com/2019/06/03/these-a ... -2020.html
Does the TSP not count as an employee retirement plan? If it does the deduction limit for MFJ is about $125k.

cas
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Re: Newly married, want to ascertain we understand rules re: HSA and IRAs

Post by cas » Tue Jan 14, 2020 4:14 pm

sailaway wrote:
Tue Jan 14, 2020 3:53 pm
Does the TSP not count as an employee retirement plan? If it does the deduction limit for MFJ is about $125k.
In the case where *he* has a retirement plan at work, but *she* does not, their MAGI limits for making a deductible contribution to a tIRA are not the same. Hers is the same as for a Roth IRA (196,000 for fully deductible tIRA contribution, MFJ, 2020) . His is lower ($104,000 for full deductible, MFJ, 2020. deductibility phases out completely at $124,000, which is where I'm guessing your "about $125,000" number comes from)).

If she had access to her own retirement plan at her own work, then her limit for making a fully deductible contribution to the tIRA would also be the lower one ($104,000).

The details on all these permutations (work retirement plan availability for self or spouse, filing status, year, tIRA or Roth) are available by clicking around on links listed on the irs.gov page that Meg77 listed.

(BTW, the $65,000 limit for making a deductible contribution to a tIRA (that OP has in the back of his mind, but can't find evidence for now) is the limit for a *single* person who has a retirement plan at work.)

Topic Author
InvisibleAerobar
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Re: Newly married, want to ascertain we understand rules re: HSA and IRAs

Post by InvisibleAerobar » Tue Jan 14, 2020 4:19 pm

thank you all for taking the time to respond. very helpful :)

I'll bookmark the relevant IRS webpages for future reference

sailaway
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Re: Newly married, want to ascertain we understand rules re: HSA and IRAs

Post by sailaway » Tue Jan 14, 2020 4:23 pm

cas wrote:
Tue Jan 14, 2020 4:14 pm
sailaway wrote:
Tue Jan 14, 2020 3:53 pm
Does the TSP not count as an employee retirement plan? If it does the deduction limit for MFJ is about $125k.
In the case where *he* has a retirement plan at work, but *she* does not, their MAGI limits for making a deductible contribution to a tIRA are not the same. Hers is the same as for a Roth IRA (196,000 for fully deductible tIRA contribution, MFJ, 2020) . His is lower ($104,000 for full deductible, MFJ, 2020. deductibility phases out completely at $124,000, which is where I'm guessing your "about $125,000" number comes from)).

If she had access to her own retirement plan at her own work, then her limit for making a fully deductible contribution to the tIRA would also be the lower one ($104,000).

The details on all these permutations (work retirement plan availability for self or spouse, filing status, year, tIRA or Roth) are available by clicking around on links listed on the irs.gov page that Meg77 listed.

(BTW, the $65,000 limit for making a deductible contribution to a tIRA (that OP has in the back of his mind, but can't find evidence for now) is the limit for a *single* person who has a retirement plan at work.)
I followed those links. They say repeatedly "if you, or your spouse, are covered by a retirement plan at work."

cas
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Re: Newly married, want to ascertain we understand rules re: HSA and IRAs

Post by cas » Tue Jan 14, 2020 4:34 pm

sailaway wrote:
Tue Jan 14, 2020 4:23 pm
I followed those links. They say repeatedly "if you, or your spouse, are covered by a retirement plan at work."
I agree, some of the higher level links are confusing in the wording. But if you work your way all the way down to the page that has the actual table that applies to all the permutations for a someone who does not have a retirement plan at work...

( tIRA Deduction Limits if You are NOT Covered by a Retirement Plan at Work )

What do you see as the limit for the cell labeled "married filing jointly with a spouse who is covered by a plan at work"?

GlacierRunner
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Re: Newly married, want to ascertain we understand rules re: HSA and IRAs

Post by GlacierRunner » Tue Jan 14, 2020 10:03 pm

Meg77 wrote:
Tue Jan 14, 2020 3:42 pm

Your family HSA contribution limit is $7000 for 2019 and $7100 for 2020. You can contribute half that amount to two separate HSAs or the full amount to one HSA in one of your names (which is a lot simpler and is what we do).

https://www.cnbc.com/2019/06/03/these-a ... -2020.html
While the IRS limit is $7100, the limit for the federal employee plan I was looking at today (for my own review) was $5,300. You should check your plan details, but yes, self + one or self+family is usually double the self allowance.

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