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New Member

Why is turbo tax defining the contribution limit to a SEP IRA as $6500 ? in the past it was calulated as a maximum 20% of self employed income

My wife is self employed, age 57, and contributed $24,000 to her SEP IRA in 2017 that was full adjusted for the AGI. Using Turbo Tax for 2018, it says her limit is $6500. What changed in the tax code OR is Turbo Tax not treating SEP IRA's properly now.   

2 Replies
New Member

Why is turbo tax defining the contribution limit to a SEP IRA as $6500 ? in the past it was calulated as a maximum 20% of self employed income

$6500 is the limit for deductible contribution to a traditional IRA in 2018 for individuals 50 years old or older. Are you entering the contribution as part of business section (shows up on the Keogh/SEP/etc worksheet), or the personal section (shows up on the IRA worksheet)? In step-by-step for “personal”, TT asked me about contributions to “Traditional IRAs”. I answered (correctly, IMO, since SEP IRAs *are* considered traditional IRAs) with the amount I contributed to my SEP IRA, and this caused TT to apply non-SEP limitations, and create a form 8606 for non-deductible contributions. The solution was to enter 0 in that section. The AGI reduction should show up on your schedule 1 as a SEP adjustment, not an IRA deduction.  

Level 15

Why is turbo tax defining the contribution limit to a SEP IRA as $6500 ? in the past it was calulated as a maximum 20% of self employed income

Nothing has changed in the tax code or in TurboTax with regard to entering SEP contributions.

TurboTax's Traditional and Roth IRA Contributions section under Deductions & Credits asks for your regular *personal* contributions to traditional IRAs.  However, SEP contributions are employer contributions, not regular personal contributions, so they are *not* to be entered under Deductions & Credits.  A self-employed SEP contribution is instead entered in the Self-employed retirement section explicitly as a SEP contribution.

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