Next year, I will have a salary of approximately $70,000 and my spouse will have a salary of about $60,000. We intend to file married filing jointly. The company I work for has an employer-sponsored profit sharing plan and I anticipate to participate in the plan. In addition to my regular job, I also have about $18,000.00 in self-employment income. Can I put any of that towards a traditional SEP-IRA to reduce my immediate tax liability, or am I ineligible because of my employer-sponsored plan?

ANSWER

The BIDaWIZ Team's Answer:

The short answer is that you can still open an SEP-IRA even if you participate in an employer sponsored plan. For 2014, the maximum contribution to an SEP-IRA is the lessor of $52,000 or 25% of your eligible compensation; 20% if you are self-employed. These limits apply to all contributions to defined benefit plans, which means you have to take into account 401(k) contributions when determining the maximum contribution to an SEP-IRA. This is referenced in IRS Publication 560.