1099 NEC and IRA

[bhooper269]

I am 72 and retired; however in 2023 I received a 1099 NEC for some work I performed. I have a traditional IRA of which I have not been able to contribute to but I am told that because I did work during 2023, I can now contribute to that IRA. Is that correct? Now, for 2024 I am required to take a RMD. How does that affect the contribution to my IRA (if I can contribute) ? Thanks!

[dmertz · Accepted solution]

With net profit from self-employment on Schedule C, you can contribute to a traditional IRA.  The amount that you are eligible to contribute for 2023 is limited to net profit minus the deductible portion of self-employment taxes or $7,500, whichever is less.

Being required to take RMDs has no effect on your eligibility to contribute to an IRA.

Be aware that any deductible traditional IRA contributions you make will reduce dollar for dollar the amount of Qualified Charitable Deductions that will be excludible from income (should you ever make a QCD).

[MinhT1]

There is now no age limit for contributing to your IRA if you have earned income.

So, for 2023, you can contribute up $6,500 (plus a catch-up contribution of $1,000 as you are over 50). Your contribution cannot be more than your net earned income.

Your 2024 RMD is based on the value of your IRA on 12/31/2023.

[bhooper269]

So if I do a" catch-up" for 2023 (i.e. contribute to my IRA) is my RMD based on what I had on 12/31/2023 OR is it the total I had at the end of 2023 PLUS what I just contributed as a catch-up? Thanks! 

[ThomasM125]

Your required minimum distribution (RMD) is calculated using the prior year end of year balance of your retirement accounts, so your contribution for 2023 would not affect your RMD for 2023. 

[bhooper269]

ThomasM125,

Just to be clear ( I didn't word my question correctly ), I am required to start taking RMD in 2024. 

Thanks

[dmertz]

The 2023 year-end balance is not to be adjusted for a regular contribution that you make in 2024 even if that contribution is for 2023.