topic If I open a SEP ira, and am self employed as a sole proprietor, how can I make contributions as the “employer” so they are business expenses and reduce SE tax? in Retirement tax questions

If I open a SEP ira, and am self employed as a sole proprietor, how can I make contributions as the “employer” so they are business expenses and reduce SE tax?

austinvoss123 — Tue, 08 Dec 2020 19:50:06 GMT

I am trying to reduce SE tax by putting into an IRA. Am sole proprietor. Have not found simple way to do this.

Re: If I open a SEP ira, and am self employed as a sole proprietor, how can I make contributions as the “employer” so they are business expenses and reduce SE tax?

fanfare — Tue, 08 Dec 2020 20:10:16 GMT

You can't. Your SEP contribution has to be calculated after your tax return is complete in all other respects.

Re: If I open a SEP ira, and am self employed as a sole proprietor, how can I make contributions as the “employer” so they are business expenses and reduce SE tax?

dmertz — Tue, 08 Dec 2020 23:13:16 GMT

A SEP contribution by a sole proprietor is not a business expense, it's an individual above-the-line deduction. As fanfare said, it cannot be used to reduce self-employment taxes. It only reduces AGI. Only SEP contributions for your employees (other than yourself) are a business expense that is deductible on Schedule C.