SEP IRA and Traditional IRA Max Limits

Forum|Forum|3 years ago
February 13, 2023
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My wife has her own realtor business (sole proprietor). Our filing status is married filing jointly... My wife doesn't have any 401k plans, but I do through my employer. Everything I've read so far shows that my wife can contribute to both a SEP-IRA and Traditional IRA, is that right?

TurboTax is calculating the max SEP-IRA limit she can contribute as the total profit of the business (minus 50% of business taxes). So basically 100% of the net profits... Everything I'm reading though on IRS websites leads me to believe it should be 25% of this net profit number, not 100%. Is this correct, should this be 25% of the net profits?

Best answer by DavidD66

Yes, your wife can contribute to a SEP-IRA and a traditional IRA. According to the IRS: "For a self-employed individual, contributions are limited to 25% of your net earnings from self-employment (not including contributions for yourself), up to $61,000 for 2022 ($58,000 for 2021; $57,000 for 2020). You can calculate your plan contributions using the tables and worksheets in Publication 560."

It sounds like your your wife/TurboTax is calculating a Solo-401(k) contribution, and not a SEP.