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Level 1

Can I contribute to both SEP and Roth 401K as a small business owner with no employee? What is the maximum amount I can contribute?

I want to have both SEP & Roth 401K. In Turbotax, when I checked "max contribution" box for SEP, it showed -$7736 on Retirement Deduction Results page, but when I put in same amount manually, it does not. Does it mean I cannot contribute to both SEP IRA and Roth 401K, or I contributed too much to one of them? I am a small business owner with no employee and have about $15000 income. I was going to contribute $12000 to Roth 401K and $3000 to SEP.  I understand that that I am able to have both. Please help. Thank you.

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Level 7

Can I contribute to both SEP and Roth 401K as a small business owner with no employee? What is the maximum amount I can contribute?

Yes. You can make contributions to both a SEP and a Solo 401K  Plan.

There are limitations on both however based on a percentage of your income you are reporting on the Sch C business.

The employer side of the solo 401(k) contribution is limited to 25% of total business income for the year.

SEP accounts are less well-known and are generally used by self-employed individuals and small businesses. SEP stands for "simplified employee pension," and all contributions are considered to be from the employer. The overall contribution limit is $54,000 for the year or 25% of the employee's compensation -- whichever is less. 

Calculating SEP IRA contributions for self-employed individuals is tricky, as the salary of the account holder is calculated after the contribution is made. Not including limits, the calculation is 18.587045% (approximately 18.6%) of net profit

The link below is an article on this very subject you may want to look at.  It does have overall dollar amounts for 2016, but it is the percentage of the profits that is impacting you and not the overall dollar limit.

https://www.fool.com/knowledge-center/can-a-person-have-a-401k-and-sep-ira-simultaneousl.aspx

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1 Reply
Level 7

Can I contribute to both SEP and Roth 401K as a small business owner with no employee? What is the maximum amount I can contribute?

Yes. You can make contributions to both a SEP and a Solo 401K  Plan.

There are limitations on both however based on a percentage of your income you are reporting on the Sch C business.

The employer side of the solo 401(k) contribution is limited to 25% of total business income for the year.

SEP accounts are less well-known and are generally used by self-employed individuals and small businesses. SEP stands for "simplified employee pension," and all contributions are considered to be from the employer. The overall contribution limit is $54,000 for the year or 25% of the employee's compensation -- whichever is less. 

Calculating SEP IRA contributions for self-employed individuals is tricky, as the salary of the account holder is calculated after the contribution is made. Not including limits, the calculation is 18.587045% (approximately 18.6%) of net profit

The link below is an article on this very subject you may want to look at.  It does have overall dollar amounts for 2016, but it is the percentage of the profits that is impacting you and not the overall dollar limit.

https://www.fool.com/knowledge-center/can-a-person-have-a-401k-and-sep-ira-simultaneousl.aspx

View solution in original post