Is the net income from a single member LLC (listed on Schedule C, line 31) considered qualified income to use for a simple IRA. All of my other income is non-qualified.

[marvinkleine]

Turbo tax says I can't take a deduction for the IRA because the W-2 wage entry is non-qualified (which is true), but makes no reference to income earned from the single member LLC reported in schedule C. The amount reported on schedule C is $2000 and wanted to pen an IRA in the same amount.

[dmertz · Accepted solution]

See IRS Pub 560 page 5, Net earnings from self-employment:  https://www.irs.gov/pub/irs-pdf/p560.pdf

For SIMPLE plans, net earnings from self-employment is the amount on line 4 of Short Schedule SE or line 6 of Long Schedule SE (Form 1040), Self-Employment Tax, before subtracting any contributions made to the
SIMPLE plan for yourself.

Do not report your SIMPLE IRA contribution under Deductions & Credits.  Only if you make a separate regular personal traditional IRA contribution (to a different traditional IRA account, personal contributions to a SIMPLE IRA account are not permitted) would you enter the contribution under Deductions & Credits.

Any amount that you contribute to a SIMPLE IRA, either as an elective deferral or as an employer contribution, reduces your net earnings available to contribute to a traditional IRA.  If your net profit reduced by the deductible portion of SE taxes and your SIMPLE IRA contribution is zero, you have no remaining eligible compensation from which to make a regular personal IRA contribution.  See IRS Pub 590-A page 2, What I Compensation:  https://www.irs.gov/pub/irs-pdf/p590a.pdf

[marvinkleine]

My apologies, I made a error in my submitted question, it should read to use for a traditional IRA and not to use for a simple IRA

[dmertz]

My answer should still be relevant.  With no contribution to a SIMPLE IRA, just consider the contribution to a SIMPLE IRA to be zero when interpreting the answer.