Are SEP-IRA distributions subject to FICA (Medicare and Social Security) taxes?

[littlelou]

I understand that SEP-IRA distributions are subject to income taxes, and in certain cases, penalty taxes. I'm not asking about income or penalty taxes. I'm asking about FICA taxes. Also note, I'm asking about SEP-IRA, which may be a little different from Traditional IRA. Thank you.

[Critter]

No they are not subject to FICA taxes.   You paid the FICA taxes on the contributed amount just like any other IRA or pensions.

[littlelou]

Does your answer (above) apply when the SEP-IRA contribution was originally made by the employer, not by me personally?

[Critter]

SEP-IRA distributions of any sort is NOT subject to FICA taxes.

<a rel="nofollow" target="_blank" href="https://www.irs.gov/retirement-plans/operating-a-sep">https://www.irs.gov/retirement-plans/operating...>

<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p4333.pdf">https://www.irs.gov/pub/irs-pdf/p4333.pdf</a>

[dmertz]

Only compensation (wages) is subject to FICA and Medicare taxes.  SEP-IRA contributions are employer contributions, not compensation.  Money contributed as SEP contributions by a W-2 employer is never subject to FICA or Medicare taxes.  However, SEP contributions made by a self-employed individual are a deducted after SE tax has been determined, so these contributions are made with money on which SE taxes will have been paid.

Distributions from retirement accounts are never subject to FICA and Medicare taxes.

[Sheep66]

Hi, Thank you. Do you know if Turbotax treats "SEP IRA is not subject to Self Employment tax"? Because when I enter $4000 SEP IRA contribution vs $4000 Elective Deferrals in Solo 401K, I received the same results. Thank you.

[BillM223]

"I received the same results."

You should receive the same results. Both of these items are reported on the exact same line on Schedule 1 (1040) - line 15.

As dmertz said just above "Distributions from retirement accounts are never subject to FICA and Medicare taxes."

As for your original question, "Are SEP-IRA distributions subject to FICA (Medicare and Social Security) taxes?", the answer is an unambiguous "NO".

[dmertz]

The original question to which the earlier replies are addressed was asking about distributions, not contributions.

Regarding contributions, contributions to a SEP plan or to an 401(k) plan do not reduce Social Security and Medicare taxes, so as BillM223 said, you should not expect any difference in self-employment taxes no matter how much you contribute from self-employment to any type of retirement plan.