MAGI Calculation with SCorp / SEP

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Joined: Thu May 04, 2017 7:16 pm

MAGI Calculation with SCorp / SEP

Postby fabdan » Wed May 17, 2017 7:57 pm


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: 5629
Joined: Fri Mar 02, 2007 2:39 pm

Re: MAGI Calculation with SCorp / SEP

Postby Spirit Rider » Wed May 17, 2017 9:35 pm

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.

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

Re: MAGI Calculation with SCorp / SEP

Postby fabdan » Thu May 18, 2017 8:55 pm

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!

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