Income Too High to Deduct and IRA Contribution - married filing jointly with a spouse who is covered by a plan at work

taxing_return — Thu, 01 Apr 2021 03:04:08 GMT

I am trying to recharacterize a Roth IRA contribution from 2020 to SEP IRA, and expected it to be deductible.

Turbotax Home & Business reports: "MAGI is over the limit for IRA deductions. To deduct a contribution, you can't have a MAGI over $124000, while being covered by a retirement plan at work."

The SEP IRA is for a self-employed real estate agent, not previously covered by a "plan at work". The IRS seems to set the limit for full deduction at MAGI of $196000 (not $124000) for a spouse that is not covered by a Retirement Plan at Work:

2020 IRA Contribution and Deduction Limits Effect of Modifi ed AGI on Deductible Contributions if You are NOT Covered by a Retirement Plan at Work | Internal Revenue Service (irs.gov)

Is this an error in Turbotax, or am I misunderstanding the rules?

How do I make this recharacterization deductible?

Re: Income Too High to Deduct and IRA Contribution - married filing jointly with a spouse who is ...

ErnieS0 — Thu, 01 Apr 2021 23:52:38 GMT

The nondeductible contribution message you are seeing is a standard message that TurboTax displays saying that you are not eligible for a deductible Traditional IRA contribution.

You are correct. A SEP falls outside the IRA. If you recharacterized a Roth because you put the money into a SEP, you will have to enter the SEP contribution separately in TurboTax.

Type self-employed retirement plans
Select Jump to self-employed retirement plans
Say NO to individual of Roth 401(k)
Say YES to Keogh, SEP and SIMPLE Contributions and fill in your information. If you check Maximize, TurboTax will show you the maximum allowable contribution

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Income Too High to Deduct and IRA Contribution - married filing jointly with a spouse who is covered by a plan at work

Re: Income Too High to Deduct and IRA Contribution - married filing jointly with a spouse who is ...