Traditional IRA Contribution Question
If I am a an employee covered by a 401(k) plan at my employer, and my AGI exceeds $55K, but I have self-employment income, can I set up a traditional IRA, and only contribute up to $5K of my self-employment income by 4/15/10, to get a further deduction, or do I have to create a SEP to do this more effectively?
Permalink Submitted by Alan Spross on Thu, 2009-12-24 01:17
If your purpose is to get the deduction, you would have to set up a SEP IRA because the traditional IRA contribution deduction begins to phase out at 55k for a single person and is totally phased out at 65k. If you are just a little over eg 57k, you can still deduct most of the contribution limit.
With a SEP, eligible contributions are fully deductible regardless of income, but your deduction is not a dollar amount like 5k, it is determined by a % of your net self employment income.