Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 5
posted Jun 4, 2019 6:38:27 PM

How to I use TT to help me figure the best place to put contributions in my IRA or SEP-IRA?

I have both a SEP-IRA and IRA. When using TT, I tend to jump around “filling in the blanks” as I go to see what to spend time on or not, especially with the tax changes this year. The actual self-employment income this year was only around $18K. So SEP-IRA is showing I need to contribute $3300~. Whoa. So, I’m thinking perhaps the traditional IRA will lower my taxes better? When I try to plug in anything for the IRA, nothing happens re: the SEP. It’s really frustrating because between this $3300, plus SE tax owed, if it weren’t for social security and savings, I’d basically be tying up (eliminating) 40% of that self employment income. And this all means a huge “contribution” in April. So, hows the best way to use TT to my advantage to get the best numbers? 

0 1 907
1 Replies
Level 15
Jun 4, 2019 6:38:29 PM

You can make both a SEP-IRA contribution and, as long as you were under age 70½ in 2018, a regular traditional RA contribution.  Neither of these can reduce your taxable income below zero and neither of these can reduce self-employment or other "Other" taxes on Schedule 4.   You cannot avoid paying self-employment taxes on the income from self-employment.

With relatively low AGI and taxable income, it might make sense to make your regular IRA contribution to a Roth IRA instead of to a traditional IRA, particularly if your taxable income is already zero without a traditional IRA contribution.  There is no age limit to making a Roth IRA contribution, only a modified AGI limit.