NISA for a non-working spouse

[KyushuMatt]

I currently have a tsumitate NISA going for myself, however I am considering opening another under my spouse’s name to maximise the tax benefit. She is a housewife so doesn’t have a taxable income. From what I have read on the matter, I can use my own income to pay into her account, but if this amount exceeds 110万円 it would be subject to gift tax. If I open a tsumitate NISA, this shouldn’t be an issue with the maximum investment far below this amount, but I’m concerned about any other potential tax issues with investing like this - does anyone have any similar experience?
I don’t have an iDeco account myself yet, but due to the investment cap being higher in NISA thought it might be more beneficial to open up another NISA first?
Any opinions on the matter are much appreciated!

[Kanto]

I currently have a tsumitate NISA going for myself, however I am considering opening another under my spouse’s name to maximise the tax benefit. She is a housewife so doesn’t have a taxable income. From what I have read on the matter, I can use my own income to pay into her account, but if this amount exceeds 110万円 it would be subject to gift tax. If I open a tsumitate NISA, this shouldn’t be an issue with the maximum investment far below this amount, but I’m concerned about any other potential tax issues with investing like this - does anyone have any similar experience?
I don’t have an iDeco account myself yet, but due to the investment cap being higher in NISA thought it might be more beneficial to open up another NISA first?
Any opinions on the matter are much appreciated!

From a long-term investing perspective iDeco should be your priority for both you and your spouse. Why? The money you contribute reduces your taxable income, and when your withdrawal the money it will not be taxed. (Tax-free in and out, up to a limit).

Yes, you can open a Tsumitate Nisa, and fund it for your wife. This will not be an issue.

IDeco and NISA together should be well under the gift tax limit.

Remember, household expenses are exempt from the gift tax. So if you are giving your wife money for bills and such you do not need to factor this in.

[KyushuMatt]

Thanks for the reply!
I understand that iDeco is advantageous due to the tax exemption, but in the case of my wife who has no income, I think iDeco perhaps loses its appeal? From what I’ve read, iDeco incurs an initial fee and then an investment fee each time you top up, so without the tax exemption incentive, NISA ended up sounding like the better option?

[Kanto]

Thanks for the reply!
I understand that iDeco is advantageous due to the tax exemption, but in the case of my wife who has no income, I think iDeco perhaps loses its appeal? From what I’ve read, iDeco incurs an initial fee and then an investment fee each time you top up, so without the tax exemption incentive, NISA ended up sounding like the better option?

I would still do both.

The total fees for iDeco are incredibly low. A one-time 3000 yen fee, and a 171 monthly fee. So you should definitely open one up for yourself as well.

Tsumitate NISA gives you tax-free capital gains for 20 years
iDeco gives you tax-free capital gains until you are 60, and beyond.

[RetireJapan]

iDeCo is much less compelling for a non-working spouse. The income tax savings are a big part of making it attractive, and the limitations on withdrawals and possible taxation (most people will be within the tax-free allowance, but tax will be due on anything above that.

So personally I would do tsumitate NISA first, then iDeCo if funds allow.

[Kanto]

iDeCo is much less compelling for a non-working spouse. The income tax savings are a big part of making it attractive, and the limitations on withdrawals and possible taxation (most people will be within the tax-free allowance, but tax will be due on anything above that.

So personally I would do tsumitate NISA first, then iDeCo if funds allow.

I would say their priorities should be His iDeco -> Her Tsumitate Nisa -> Her iDeco

[RetireJapan]

[quote=Kanto post_id=10351 time=1609409663
I would say their priorities should be His iDeco -> Her Tsumitate Nisa -> Her iDeco
[/quote]

Completely agree. Although I would do his iDeCo, both tsumitate NISAs, then her iDeCo if funds allow

[KyushuMatt]

Thank you both for the replies!
That gives me a good idea of how to prioritise our investments and is also reassuring with regard to the fact that there are no tax issues with funding my wife’s investments.

[beanhead]

[quote=Kanto post_id=10351 time=1609409663
I would say their priorities should be His iDeco -> Her Tsumitate Nisa -> Her iDeco

Completely agree. Although I would do his iDeCo, both tsumitate NISAs, then her iDeCo if funds allow
[/quote]

How about when you throw Junior NISAs into the fray? Should they be prioritized above a spouse iDeCo?
Cheers

[Kanto]

How about when you throw Junior NISAs into the fray? Should they be prioritized above a spouse iDeCo?
Cheers

That could be argued, as the relaxation in the rules makes them a better deal. However, no one really knows how the rules are going to change after 2023 when the program ends.

They SAY we can sell them and access the profits at any time, but we do not know how that will work in practice.