## MAGI Calculation with SCorp / SEP

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fabdan
Posts: 2
Joined: Thu May 04, 2017 7:16 pm

### MAGI Calculation with SCorp / SEP

Hi,

I am trying to evaluate if my wife and I will be eligible to contribute for the RothIRA for this year (2017),
but I am confused on how to calculate my MAGI.

We are a married couple.
• - Wife: Gross income=\$62,000. 403B Contribution=\$18,000
• - Husband: Work as employee of SCorp. Gross income of SCorp=\$163,000. SEP IRA=\$25,000. Salary \$100,000. Corporate income at end of year will be around \$26K.

Will my MAGI be the following? or am I missing something...
MAGI => Wife (62,000 - 18,000) + Husband (100,000 - 25,000) + SCorp profit (26,000) = \$145,000

Thanks! This is the first time I work with an SCorp, and I am basically confused on how the SEP works in MAGI calculation

Spirit Rider
Posts: 7992
Joined: Fri Mar 02, 2007 2:39 pm

### Re: MAGI Calculation with SCorp / SEP

With an S-Corp, employer retirement plan contributions are a deduction of the corporation. I assume that your \$26K S-Corp ordinary business income reflects this.

Your MAGI = Wife (62,000 - 18,000) + Husband (100,000) + SCorp profit (26,000) = \$170,000.

If you are worrying about your MAGI, why are you using a SEP IRA and not a one-participant 401k? An employee deferral would reduce your MAGI by \$18,000.

fabdan
Posts: 2
Joined: Thu May 04, 2017 7:16 pm

### Re: MAGI Calculation with SCorp / SEP

Thanks for the answer. Yes the \$26K reflects the SEP deduction, taxes, expenses...
You're right I may have to use the solo 401K to reduce the MAGI more... but at least for this year with MAGI < 186K, I will be able to use the full Roth IRA so that's good. Thanks!