Question

Will contributing to a SEP reduce my adjusted income and allow me to quality for EIC?

Forum|Forum|5 years ago
March 21, 2021
3 replies
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TurboTax Self Employed Online

Employee

No you cannot reduce your income in order to qualify for EIC. If it is any comfort, when you are right on the edge of qualifying for EIC, the EIC amount you could receive would be very little.

M

MAK70

For the Earned Income Tax Credit, the adjusted gross income (AGI) is the amount the IRS uses. Since a SEP is deducted in the calculation of the AGI, contributing can be used to adjust you income to qualify for the earned income credit.

Z

zraineAuthor

I am still unclear as I have received conflicting answers

ReneeM7122

It depends. If you're a sole proprietor or an employer, SEP IRA contributions are tax-deductible. They reduce your taxable income. However whether you can qualify for the EIC depends on a calculation. You can use the Earned Income Tax Credit Assistant to determine if you’re eligible for the earned income credit (EIC).

IRS Pub 560: https://www.irs.gov/pub/irs-pdf/p560.pdf