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How to be able to contribute max to Retirement?

I meet the IRS requirements of a Real Estate professional. I own real estate that is leased out.

Each property has its own LLC. (Husband and wife-2 member LLC. No salaries to anyone. No employees). My husband is full time in this business as well with me.

For IRS 1040 purposes, we enter the rental income and losses in Sch E. We do not use a Sch C nor do we use form 1065.

Someone had suggested using Sch E some years ago and so far it seems to have been accepted by the IRS.

Based on the income of the above (via ScH E) can we set up a SEP IRA and get the max use of this Retirement plan?

I hear one can contribute the most by setting up a SEP IRA. (In 2020, $57,000 per person?)

If we cannot set up the SEP IRA and contribute the max possible via Sch E, what should we do to be able to max the retirement contribution?

What advise would you give us so we can contribute the max?

Would it be a SEP IRA? Or would it be some other Retirement Plan?

Reply to
Gloria
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If an LLC has two members, it'd be a partnership and you'd need form

1065. It sounds like you have single member disregarded LLCs jointly owned by both spouses which is OK if you live in a community property state.

As far as I know there is no way to make retirement contributions from Sch E income. Really, you really need to talk to a tax pro who understands estate income tax to sort this out. There is certainly some way you can set up a tax deferred retirement account, but the possible penalties for doing it wrong can be substantial.

Once that's done you can probably return to doing your own taxes.

Reply to
John Levine

Agreed. I ran into this question earlier in the year, and this was one of the supporting references I found at the time.

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The punchline was that if the income didn't require a FICA deduction, it was not eligible income for IRA / 401(k) purposes.

Reply to
JoeTaxpayer

oops, who understands REAL ESTATE income tax ...

Reply to
John Levine

Except under the SECURE Act, student fellowships are eligible income for IRA purposes.

Reply to
Maria Ku

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