IRA Options — Moonlight and Save More

In addition to your day job, if you create a part-time self-employed position for yourself, you can also create additional retirement saving options. One option is a SEP-IRA which allows you to contribute up to 25% of your earnings up to $52,000 — regardless if you are covered by your day job’s retirement plan. Another option is the Simple IRA, which isn’t based on a percentage of income but allows you to contribute up to $15,000 of earnings if you’re 50 or older ($12,500 if younger). Remember to set-up a Simple IRA before October 1 of the tax year, whereas a SEP plan lets you put it off until the following year’s tax filing deadline, usually April 15th.

Medicare Deductions

Self-employed individuals can deduct medicare premiums. In fact, premiums paid for all parts of medicare are included in the deduction for health insurance as a line item on IRS Form 1040. This easing also applies to business partnerships provided the partnership paid the premiums or reimbursed the partners. These amounts are reported as guaranteed payments that are taxed as income. Similar rules apply to a 2% or more shareholder of an S-Corp. Here, either the individual pays the premiums and gets reimbursed by the firm, or the S-Corp pays premiums directly. In both cases, premiums must be included as taxable income to the shareholders.

Conveniently located in Central New York state, Wolfson Financial Services is a financial planning and consulting firm dedicated to helping individuals, families and organizations reach their financial goals. If you have questions about this article or if you would like to become a client of Wolfson Financial Services, please call (315)449-4730.