Financial Products

Financial Products

Questions about financial product options? Find discussions around a wide variety of financial service products here. Looking for your first debit card or a seasoned saver looking for tips to build your bank account, this is a great place to share and learn.

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Pioneer
Posts: 1
Registered: ‎04-10-2017
Accepted Solution

SEP IRA Limitations

I am a self-employed business owner.  I received an inheritance from my mother's annuity in 2016.  Can I include the inheritance income along with the income from my sole proprietorship to invest into a SEP IRA?  Or can it only be self-employment wages?

Esteemed Pioneer
Posts: 10
Registered: ‎10-22-2015

Re: SEP IRA Limitations

The inheritance would not be considered compensation, and therefore could not be used to determine how much you may contribute to your SEP.  You could certainly use the funds to make the contribution, based on the contribution amount as determined by your self-employed compensation amount.

 

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-contributions

 

From the IRS Website:

 

How much can I contribute to my SEP?

The contributions you make to each employee’s SEP-IRA each year cannot exceed the lesser of:

  1. 25% of compensation, or
  2. $54,000 for 2017 ($53,000 for 2015 and 2016 and subject to annual cost-of-living adjustments for later years).

 

Tax Pro
Posts: 5,198
Registered: ‎02-23-2016

Re: SEP IRA Limitations

Hi chrissyschepker,

 

Welcome to the H&R Block community.

 

The most important thing to remember here is that your contribution limit for an IRA of any kind, including SEP IRA accounts, is determined in part by your earned income.  Your inheritance income is not earned income and is not taken into consideration when determining how much you can contribute, however you can make contributions with any type of income.

 

If you have any other questions I'll be glad to help.

 

Louis,

Senior Tax Advisor (Tampa, FL)