Can SEP plan participants make tax-deductible IRA contributions to their SEP-IRAs?
Employers contribute under a SEP plan to each participant’s SEP-IRA, and a SEP-IRA is generally no different from any traditional IRA. Employer SEP contributions do not affect the amount a participant can contribute to an IRA. So, assuming the SEP-IRA permits non-SEP contributions, regular IRA contributions can be made by the participant to his or her SEP-IRA, up to the maximum annual limit (for 2011, $5,000 if under age 50 and $6,000 if 50 or over). However, the amount of the regular IRA contribution that can be deducted on the employee’s income tax return may be reduced or eliminated due to the employee’s participation in the SEP plan. See Publication 590, Individual Retirement Arrangements (IRAs), for more information on contribution and deduction limits.
