NeonLotus, the text you quoted from the IRS website is incomplete and is therefore misleading, not contradictory. The SEP contribution by a self-employed individual reduces the amount of compensation available to support an IRA contribution. It does not directly reduce the amount of an IRA contribution that one can make. If one has net earnings from self-employment greater than or equal to the maximum permissible IRA contribution after subtracting the deductible portion of self-employment taxes and the amount of any self-employed retirement deduction such as that resulting from a SEP contribution, the amount that one is permitted to contribute to an IRA is not reduced. The limitation with regard to compensation is that the regular IRA contribution plus the deductible self-employed retirement contribution plus the deductible portion of self-employment taxes is not permitted to exceed net profit from self employment.
