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zraine
New Member

Will contributing to a SEP reduce my adjusted income and allow me to quality for EIC?

 
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4 Replies

Will contributing to a SEP reduce my adjusted income and allow me to quality for EIC?

No you cannot reduce your income in order to qualify for EIC.  If it is any comfort, when you are right on the edge of qualifying for EIC, the EIC amount you could receive would be very little.

MaryK4
Expert Alumni

Will contributing to a SEP reduce my adjusted income and allow me to quality for EIC?

For the Earned Income Tax Credit, the adjusted gross income (AGI) is the amount the IRS uses.  Since a SEP is deducted in the calculation of the AGI, contributing can be used to adjust you income to qualify for the earned income credit.

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zraine
New Member

Will contributing to a SEP reduce my adjusted income and allow me to quality for EIC?

I am still unclear as I have received conflicting answers

Will contributing to a SEP reduce my adjusted income and allow me to quality for EIC?

It depends.  If you're a sole proprietor or an employer, SEP IRA contributions are tax-deductible. They reduce your taxable income.  However whether you can qualify for the EIC depends on a calculation.  You can use the Earned Income Tax Credit Assistant to determine if you’re eligible for the earned income credit (EIC).

 

 

IRS Pub 560:  https://www.irs.gov/pub/irs-pdf/p560.pdf

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