IRA or SEP IRA if Spouse has a 401k
A married couple files a joint tax return. A self-employed working spouse wants to contribute to an IRA or a SEP-IRA. Her partner has a plan at 401k plan work. Will the spouse be able to fully deduct the IRA or SEP-IRA contributions if her spouse is making 401k plan contributions? Or is there an income limitation on the deductibility of her IRA or SEP-IRA? If so, would she be better off with a Solo401k because she would not face the same income limitation on deductibility? Thanks!
Permalink Submitted by Barry Dreayer on Wed, 2024-12-04 12:46
No income limit with respect to SEP but it does reduce QBI if applicable. I salivate when a client is self-employed and already has a taxable investment account. A solo 401(k) is usually ideal as it allows you to sock away in the Roth component a huge amount each year (23K-30.5K) that might be in the taxable account generating taxable earnings instead of nontaxable earnings. Then you can also contribute from the employer side which equates to the SEP.