Full time job with 401K, also independent contractor. Can I contribute to IRA using the independent income in 2022 to help reduce taxes?

Yes, you might be able to deduct traditional IRA contributions. But the deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels.

Please see IRA deduction limits for details.

 

For 2022 the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:

• $6,000 ($7,000 if you're age 50 or older), or
• If less, your taxable compensation for the year

Hello Dana, Thanks for the help. Income exceeds the limit in my case. Is it possible to use SEP IRA option now? I was told that part-time contractors could have SEP IRA on top of the other employer-sponsored 401K. Could I do this now for year 2022?

Yes, you can contribute to a SEP IRA if you're self employed.  Contribution limits are 25% of compensation or 57K for 2022.

 

Here's some good info on Self Employed Retirement Plans from Expert @DianeW777:

 

"Here are five self-employed retirement plans that may work for you: 

• Traditional or Roth IRA.(best when starting out)

For 2022, 2021, 2020 and 2019, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:

• $6,000 ($7,000 if you're age 50 or older), or
• If less, your taxable compensation for the year
• Solo 401(k)

The limit on employee elective deferrals (for traditional and safe harbor plans) is:

• $20,500 in 2022 ($19,500 in 2021 and 2020; and $19,000 in 2019
• SEP IRA. 
  • Contributions you make for 2021 to a common-law employee's SEP-IRA can't exceed the lesser of 25% of the employee's compensation or $58,000. (See special limitation for contributions for yourself)
• SIMPLE IRA.  (Must allow employees to participate, see details)
  • The amount the employee chooses to have you contribute to a SIMPLE IRA on his or her behalf can't be more than $13,500 for 2021 and increases to $14,000 in 2022 

More information can be found in IRS Publication 560."