Maximizing Your LLC SEP Contributions with a High-income Main Job
If my LLC is my side job and my main job I make over 160k - how much can I add to my LLC SEP?
The amount that you can contribute to your LLC's SEP plan depends on the profit your LLC generates and the compensation you receive from your LLC. Since you have a main job with compensation over $160,000, that impacts the calculation of the maximum amount you can contribute to the SEP plan for your LLC.
For tax year 2021, the maximum contribution for an individual's SEP plan is 25% of compensation or $58,000, whichever is smaller. If you're below 50 years old, the contribution limit is the lesser of those two numbers.
If you earn over $160,000 from your main job, the calculation of your LLC's contribution limit would be based on a percentage of your profits from the LLC. The calculation is done as follows:
Determine your "compensation" from your LLC. Your compensation is generally the amount you receive as wages, salary, or guaranteed payment and shown on your W-2 or K-1 form for tax filing purposes.
Determine the profit of your LLC by subtracting business expenses from revenue.
Take 25% of your LLC's profit as the maximum amount you can contribute to the SEP plan for the year.
However, there are limits to how much you may deduct based on the IRS compensation limit. If your side job is generating significant profits, you may want to consult with a tax professional to ensure you are taking full advantage of retirement savings options while also adhering to IRS guidelines.