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

[taxing_return]

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 Modified AGI on Deductible Contributions if You are NOT Covered by a Retirement Plan at Work | Internal Re...

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

How do I make this recharacterization deductible?

[ErnieS0 · Accepted solution]

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