Is there a combined S limitation for SEP contributions?

March 5, 2003

Subject:  SEP limit
From:  Judy
Date:  Fri, 21 Feb 2003

You said, "There is an overall limit on SEP contributions. The total of nonelective contributions to a SEP-IRA cannot exceed the lesser of 15% of the employee's compensation or $35,000 for 2001, 25% of the employee's compensation or $40,000 for 2002."

Can a small business, Husband and Wife Sub S Corp, contribute $40,000 for each of them on both husband and wife's separate salaries or are they limited to $40,000 combined because of the Sub S limitation? Has this changed in recent years?

Thanks

Answer

Date:  28 Feb 2003

Hello Judy,

The limitation is separately computed for the husband and wife employees. There isn't a combined S limitation.

Good luck!
Mike Gray

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