SEP and Trad IRA deductibility

Forum|Forum|2 months ago
March 19, 2026
2 replies
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Looking for expert on this matter. 4 people from Turbo yesterday either gave wrong info or didn’t have answers. We are Married filing jointly and both self employed in different businesses as solo owners . No employees. Is it new that if 1 person contributes to a SEP b/c more advantageous the deductibility of the other spouse’s Trad IRA (8000) is limited by AGI?

a) all prev tax preparer’s, including Turbo last year for 2024 taxable year showed full deductibility of SEP for one spouse and Trad IRA for other spouse even though AGI was greater than the income limits.

b) if 1 spouse has the SEP, can the other spouse get full deductibility of their Trad IRA (8000) ( diff SE businesses)

C) in order to benefit from full deductibility, is the solution to stop contributing to the SEP and each contribute max to Trad IRA?

Bsch4477

Level 15

If one spouse contributes to a SEP the other spouse is subject to AGI limits for their deductibility. You would have to weigh the savings from maximum IRA contributions against the savings from contributing to your SEP.

user17708643219

Level 6

Answers to your questions below:

A. No, this is not a new rule. A Simplified Employee Pension (SEP-IRA) is considered an employer-sponsored retirement plan, meaning if you contribute to one, you are "covered at work". This means that your ability to deduct contributions to a separate, personal traditional IRA is subject to income-based limits (MAGI) set by the IRS.

B. It depends if your income exceeds certain income limits. For 2025 If you are married and your spouse is covered by a retirement plan at work; and you aren’t, and you live with your spouse or file a joint return, your deduction is phased out if your MAGI is more than $236,000 but less than $246,000. If your MAGI is $246,000 or more, you can’t take a deduction for contributions to a traditional IRA.

C. It depends if your MAGI exceeds certain income limits. Like Bsch4477 mentions in his post, you should run a few scenarios to see which would give you the most advantageous outcome.

Here are a few IRS links that provide more information on this: