C corp SEP IRA contributions and Traditional IRA contributio
Can the owners of a C corp, which also make SEP IRA contributions, make a traditional IRA contribution to their same SEP IRA account? I understand the traditional IRA contributions will be subject to compensation limits.
Permalink Submitted by Jose Morales on Tue, 2009-01-06 17:03
A contribution to a Traditional IRA can be made, the real question would be whether or not that contribution is deductible.
Permalink Submitted by Kevin Zoltek on Tue, 2009-01-06 19:04
Is the trad. IRA deductible for tax purposes? Again, I understand the compensation limitations. I guess what I am asking are there other limitations to the deductibility of the contribution because of the SEP IRA contribution in the same year?
Permalink Submitted by Alan Spross on Tue, 2009-01-06 19:28
Yes, the SEP contribution is considered participation in an employer retirement plan. That means that if his modified AGI exceeds 53,000 if single or 85,000 if filing jointly (2008 figures), the deduction for his TIRA contribution begins to be phased out. It is totally eliminated at 63,000 and 105,000 respectively.
Deduction of a spouse’s IRA contribution can also be affected.
Permalink Submitted by Denise Appleby on Tue, 2009-01-06 19:30
[quote=”[email protected]“]Is the trad. IRA deductible for tax purposes? Again, I understand the compensation limitations. I guess what I am asking are there other limitations to the deductibility of the contribution because of the SEP IRA contribution in the same year?[/quote]
Just to qualify, the IRA contributions are not subject to compensation limits – except where your IRA contributions cannot be more than your taxable compensation ( i.e. if your taxable compensation is $4,000, your IRA contribution cannot be more than $4,000 for the year). [i]That’s what you probably meant- but just to clarify in case an IRA newbie reads the post[/i] 🙂
As urusei2 said, the issue is whether the contribution is deductible.
The SEP contribution generally affects the deductibility of the traditional IRA contribution for the year that the contribution is actually deposited in the SEP IRA. For instance, if the contribution is for tax-year 2008, but deposited in 2009, it affects the 2009 traditional IRA contribution. If it is deposited in 2008, it affects the 2008 IRA contribution.
See the following article for details http://www.retirementdictionary.com/articleActiveParticipantStatusCanYou…