Can I contribute S-Corp shareholder distributions to IRA?

[pencil123]

I'm both an owner and an employee of an S-Corp. Is the maximum amount I'm allowed to contribute to IRA the amount shown in my W-2 Box 1 (assuming it's below $6,000)? Or can I contribute my shareholder distribution as well?

Thanks for your help!

[macuser_22]

The most you can contribute to all of your traditional and Roth IRAs is the smaller of:

For 2019 and 2020, $6,000, or $7,000 if you’re age 50 or older by the end of the year; or
your taxable compensation for the year.

(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).

See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355

[pencil123]

I see. Thank you very much for that info! If I contributed part of my w-2 income to a pre-tax solo 401K as an employee contribution, should I subtract that 401K contribution from the amount I can use to contribute to IRA?

My S-Corp also made an employer profit-sharing contribution to my solo 401K, do I need to subtract the employer contribution from my w-2 income to arrive at the maximum IRA allowance?

[dmertz]

Shareholder distributions from an S-corp are not compensation from the S-corp.  Your compensation from the S-corp available to support an IRA contribution is only what is reported in box 1 of your W-2 from the S-corp  and only your compensation supports an IRA contribution.

If you made elective deferrals to a 401(k) plan of the S-corp, the amount in box 1 of your W-2 from the S-corp has already been reduced by the amount of your elective deferrals, so the amount in box 1 of your W-2 from the S-corp remains the amount available to support an IRA contribution.