I have a client who was 73 years old in 2024. He unexpectedly earned $100,000 in consulting income in 2024 that he did not inform me or his accountant about in advance, so his 2024 income is much higher than we had originally planned.

Here’s the situation:

• He gave part of his Required Minimum Distribution from his inactive SEP IRA to charity using the Qualified Charitable Distribution (QCD) strategy.
• His accountant is now suggesting making a 2024 SEP IRA contribution of up to $25,279 to reduce his taxable income for 2024.
• The SEP IRA in question has not received a contribution in over 15 years — this year’s would be the first since then.

My concern:

As I understand it, post-age 70½ deductible IRA contributions can cause offsets that reduce the excludable amount of QCDs from income under the SECURE Act rules. The “anti-abuse” provision says that deductible IRA contributions made after age 70½ reduce the tax-free portion of QCDs, even if the QCDs are from a different account.

My questions for the group:

1. Aggregation scope: Does this offset/aggregation rule apply only to traditional IRAs, or does it also include SEP IRAs and SIMPLE IRAs?
2. If it does apply, would opening a separate, new SEP IRA to receive the 2024 deductible contribution avoid tainting the 2024 QCDs from the original inactive SEP IRA? Or is the IRS going to aggregate all SEP/traditional/SIMPLE IRA balances regardless of account separation?
3. If funding a SEP IRA contribution this year will indeed cause issues with excluding his 2024 QCDs from income, could we instead establish a solo 401(k) for 2024 and make either employee and/or employer contributions based on his consulting income? If so, is there still time to open and fund that for 2024 given that his consulting income is self-employment income?