401K profit and SEP IRA

[gjgonsalves]

In 2024, I worked 10 1/2 months for a large law firm as a W2 employee and 1 1/2 months for my own firm (solo practice).

I made about $500K as a W2 employee and didn't get paid for the 1 1/2 months for the work that I did for my own firm.  (I started getting paid in 2025 for the work that I did for my own firm during the last 1 1/2 months of 2024.)  Accordingly, I had no revenue for the 1 1/2 months at my own firm in 2024 and a loss of around $3,000.

My wife made about $50K as a W2 employee for a school and I made an additional $200K from interest, capital gains, distributions from an inherited IRA, etc.

Question:  Can I contribute to a 401K and SEP IRA for my own firm and if so, what is the maximum amount I may contribute to each?

[AmyC]

A SEP IRA is based on 20% of your business income so 2024 isn't available.

A 401k contribution for the employer is limited to 25% of wages, again zero for 2024. The employee must have wages to contribute.

Reference: IRS retirement plans

[gjgonsalves]

Thank you for the response regarding whether I can contribute to a SEP IRA or 401K.

Can I make a tax-deductible contribution to a regular IRA (or any other retirement plan) under these circumstances?  If so, how much?  I am 64 years old now.

[SusanY1]

It depends.  If you or your wife were covered by a retirement plan at work (including your large firm job for the first part of the year) then you would have too much income to make a deductible contribution.  You can make nondeductible contributions to a Traditional IRA only if either of you were eligible to participate in an employer plan during the year, whether or not you did participate. 

If you were eligible, the box "Retirement plan" will be checked on your W-2.