SEP IRA with Tradidional IRA
My question derives from the table(s) found within the Sept. Issue. If a self employed person has a properly implemented SEP IRA and traditional IRA can he contribute $49K ($45,000 + $4,000) and then subsequently deduct the $49K?
Permalink Submitted by Denise Appleby on Mon, 2007-10-01 22:38
If compensation allows, he would be able to contribute the $45,000 to his SEP and deduct the amount.
However, consider the following:
He would need a modified net profit of about $220,000 in order to contribute $45,000 to his SEP IRA ( $225,000 x 20% = $45,000).
His IRA contribution would not deductible for the year the SEP contribution is deposited to his account, because he would be considered an active participant for that year. See definition of active participant at http://www.retirementdictionary.com/a.htm
See the article at http://www.retirementdictionary.com/articles-backtobasics.htm for information about the thresholds that apply to IRA deductibility.