Contact UsIf I have an employer-sponsored retirement plan at my primary, salaried job, can I also have a traditional IRA (deducted from income) from my secondary self-employment income?
Next year, I will have salary income of approximately $70,000. The company I work for has an employer-sponsored profit sharing plan. I will also have about $18,000.00 in self-employment income (not incorporated, just extra I earn in cash). Can I put any of that towards a traditional SEP-IRA, to reduce my immediate tax liability, or am I ineligible because of my employer-sponsored plan, even though this income is not from that employer? (Married filing jointly, combined income above $130K).
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Tax Professional Answers
Kathryn Morgan
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539 weeks ago
Yes you sure can. Your total AGI is going to be above the limit for a traditional IRA, since you are in an employee sponsored retirement plan as well. But you can still do a ROTH IRA or the SEP-IRA through your Schedule C. You could also up your contributions to your W2 retirement plan to offset some additional taxable income as well. Another option you might want to take, if your spouse is not in an employer sponsored retirement plan is to have her do a traditional IRA which would be deductible for her immediately.
Your IRA contribution is allowed to be up to $5,000 ($6,000 if over 50 yrs old) or the total of your earned income. That would be your W2 and Schedule C income.
Question Owner
To clarify here--I am not permitted to contribute to my W2 retirement plan (it's a profit sharing plan). My spouse is covered by a plan at work. I don't want to do a Roth IRA, my goal is to immediately reduce the $18,000 taxable income on my Schedule C. So I can put 18.6% (or whatever it works out to) of that into a SEP-IRA and deduct it from the Schedule C income, regardless of the employer retirement plans on both my husband and my W2s?
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539 weeks ago
Kathryn Morgan
Your maximum contribution is up to 20% of your net SE tax after subtracting the 1/2 of your SE tax from your AGI. For example using your $18K figure as net SE income would leave you with a maximum SEP contribution of $3346 for the year. ($18,000 X (.9235 X .153 X .5) - $1272 X .20 = 3346)
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539 weeks ago