Self employed retirement deductions

[Zebra5]

I have w2 income as well as 1099 income which i report on sch C. I want to take advantage of self employment retirement contribution deduction. For my w2 income i already contribute full $22500 for 2023 to 401K. Based on my 1099 income i can contribute towards a traditional SEP.

My question is instead of opening new traditional SEP account can i contribute to an existing traditional IRA account, which i had opened few years ago by rolling over 401K from previous employment ?

[Bsch4477]

You can contribute much more to a SEP account. The two accounts can be merged into one since the withdrawal tax consequences are the same. But designating a SEP gives you more flexibility in terms of contributions and in turn how it decreases your AGI. 

[Zebra5]

My question still remains can i make the contribution to an existing traditional IRA instead of opening a new traditional SEP account. I don't want to get into hassle of opening a new account and then merging. Per turbotax desktop app, the max i can contribute to SEP is $2,250 for 2023.

[AnnetteB6 · Accepted solution]

Contributions to a Traditional IRA instead of a SEP will be governed by the fact that you are already covered by a retirement plan at your W-2 job and your income.  You may not be able to gain a tax advantage by being eligible to make a deductible contribution to the Traditional IRA.

Making a contribution to a SEP IRA based on your business income may give you more tax advantages because the contribution will be deductible based on the fact that it is a self-employed retirement contribution.  It does not have the same limitations that the Traditional IRA does.

So, to answer your question, you can make a contribution to a Traditional IRA instead of a SEP IRA, but it will not be considered to be a self-employed retirement plan contribution.  It will just be a Traditional IRA contribution that may or may not be deductible.

@Zebra5 

[Zebra5]

Thanku that answered my question, can you recommend and financial institutions where i should check out traditional SEP accounts.