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pao3
New Member

Need info about SEP IRA contributions. Turbo says I can contribute 7949 but I only earned 35000 gross and 22000 net. I contributed 6500 to my Roth. I'm >55, self-employed

 
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2 Replies
CathiM
New Member

Need info about SEP IRA contributions. Turbo says I can contribute 7949 but I only earned 35000 gross and 22000 net. I contributed 6500 to my Roth. I'm >55, self-employed

If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions.

  • The deduction for the deductible part of your self-employment tax.

  • The deduction for contributions to your own SEP-IRA.

The deduction for contributions to your own SEP-IRA and your net earnings depend on each other. For this reason, you determine the deduction for contributions to your own SEP-IRA indirectly by reducing the contribution rate called for in your plan. Your SEP contribution cannot exceed the lesser of 25% of compensation, or $54,000 for 2017. 

The amount of the regular IRA contribution that you can deduct on your income tax return may be reduced or eliminated due to your participation in the SEP plan. Employer contributions to a SEP-IRA won’t affect the amount an individual can contribute to a Roth or traditional IRA.

To read more click on this IRS link SEP Plan FAQs - Contributions.

Need info about SEP IRA contributions. Turbo says I can contribute 7949 but I only earned 35000 gross and 22000 net. I contributed 6500 to my Roth. I'm >55, self-employed

Roth IRAs and SEP IRAs are two different entities.  Roth contributions are after-tax and SEP contributions are pre-tax contributions for the self-employed.  The limits for each are calculated differently.  If you are older than 55 and contributed no more than $6,500 to your ROTH, you are within the guidelines.  

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