Can you contribute to both a spousal IRA and SEP IRA?

[mail-skyoshi]

My wife was a SAHM until this year. We have always contributed towards her (spousal) IRA. She started her own business in 2015 as a sole proprietor. Can she contribute to a SEP IRA and still contribute to the spousal IRA with my income?

[Carl]

According to what I read at https://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-IRAs-Contributions yes you can. But DO make sure you read the FAQ so that contribution limits are not exceeded. Basically it says:

If you file a joint return and have taxable compensation, you and your spouse can both contribute to your own separate IRAs.

Your total contributions to both your IRA and your spouse’s IRA may not exceed your joint taxable income or the annual contribution limit on IRAs times two, whichever is less. It doesn't matter which spouse earned the income.

Roth IRAs and IRA deductions have other income limits. See IRA Contribution Limits and IRA deduction limits.

[dmertz]

Note that the amount that she is permitted to contribute to a SEP-IRA is only a portion of her net profit from self-employment.  Be sure to let TurboTax calculate the amount.  Since only a portion can go to the SEP-IRA, the remainder of her net profit minus the deductible portion of her self-employment taxes can be used to fund her regular individual IRA contribution.  If that remainder is sufficient to fund only part of her regular IRA contribution, the rest of her contribution will come from your eligible compensation as a spousal IRA contribution (as long as your compensation is greater than hers).

[mail-skyoshi]

Thank you.