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The price to pay for being active

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. I’m a 58-year-old self-employed person with a SEP and my 55-year-old wife contributed to her IRA. Am I an active participant for IRA purposes? S.I.M., Tampa, Fla.

A. Yes. A SEP is treated as an employer retirement plan in which you actively participate. Assuming you file a joint tax return and your wife doesn’t participate in an employer retirement plan on her own, the tax law limits her deductions for IRA contributions if your joint modified adjusted gross income (MAGI) exceeds a specified limit. For 2014, deductions phase out between MAGI of $181,000 and $191,000. For example, if your MAGI is $186,000, and your spouse contributes the maximum $6,500 to her IRA in 2014, you can deduct $3,250.   

Tip: Consider a Roth IRA as an alternative.

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