funding spouse IRA with my money market settlement fund

[Love4Learning]

We are in the process of contributing to traditional IRA and do backdoor roth.

I have Vanguard brokerage under my name only. Spouse have Vanguard trad IRA and roth accounts that we both have full controls (login/buy/sell etc..)

The money is already in my brokerage account Money Market settlement fund. I did a quick test and it looks like from my account the website allows me to select and contribute to my spouse's Trad IRA account using the money existing in my brokerage settlement fund (under my name only).

Before I do that, I want to check to see if there's any legal issue or tax implication funding the spouse's trad IRA account this way?
Basically I think I am selling the funds in my brokerage account to then transfer to my spouse's trad IRA account. Is this going to make it more complicated tax wise?

Thanks,

[typical.investor]

We are in the process of contributing to traditional IRA and do backdoor roth.
...
Is this going to make it more complicated tax wise?

If you have earned income and are eligible to make the contribution, then it does not matter where the actual contribution is made from (ACH from bank account after direct deposit from employer, cash in brokerage account, sale of assets in brokerage account then transfer, received dividends, etc). The requirement is that you have US taxable earned income in order to be eligible for the contribution.

[sycamore]

Is this going to make it more complicated tax wise?

In addition to typical.investor's good answer, I'll add that it's no more complicated than before:

1) You need to indicate which tax year the contribution is for. At this point in 2025 prior to filing your return, you can contribute for 2025 or still contribute for 2024. The Vanguard web site should prompt you for which year.

2) For your 2024 tax return, remember to tell your tax software/accountant a few things:
- what kind of IRA (traditional or Roth) you contributed to
- if it's a traditional IRA, whether you want it to be a deductible contribution.
- and of course how much the contribution was
You won't have a 1099 form to rely on. The 5498 form (which documents a contribution) doesn't come until after you file your return.

[David Jay]

It is fine to contribute funds from any source, as long as income limits are met.

As a caution (you talked about both spouses having access to all accounts), once funds are in the account they become individual assets (IRA = Individual Retirement Account). One would not be allowed to use funds from one spouse's traditional IRA and convert to the other spouse's Roth, because after contribution they are personal funds.