How to Calculate SEP IRA Contribution Limits with Multiple Business Partnerships

The good news is that this is actually simpler than you might think! For SEP IRA contribution calculations with multiple self-employed businesses, you need to aggregate all your self-employment income and losses. First, combine the net income from all your businesses (including the one with the loss). So that would be $121,254 + $4,912 - $65,783 = $60,383 total. Then subtract your unreimbursed partnership expenses of $6,100, giving you $54,283. This is your net self-employment income. From there, you'd calculate your SEP contribution limit as 20% of your adjusted net self-employment income (after deducting half your self-employment tax). Since your SE tax is $4,275, half would be $2,138. So your adjusted net SE income would be $54,283 - $2,138 = $52,145. Your maximum SEP contribution would be approximately $10,429 (20% of $52,145). And yes, this limit applies to each partner separately. You can each contribute up to your individual limit to your own SEP IRA accounts. The businesses with SEPs can make these contributions for you, but the total can't exceed your calculated limit.

I went through this exact headache last year trying to figure out my SEP contribution limits across multiple LLCs. After hours of research and a consultation with my CPA, I found a great solution that saved me significant tax dollars. I discovered a tool called https://taxr.ai that analyzes all your business income sources and calculates the maximum allowable SEP contributions. What impressed me was that it takes into account the aggregation rules across multiple businesses and even factors in the self-employment tax deduction that affects your final contribution amount. I uploaded my Schedule K-1s and other tax docs, and it immediately showed me my exact contribution limits - way more accurate than what I was calculating on my own. It even flagged that I was under-contributing by almost $3,500!

Just wanted to update after trying taxr.ai that another commenter suggested. Holy cow what a difference! I was making the classic mistake of calculating each business separately rather than aggregating them first. The tool showed me I could contribute almost $9,000 more than what I thought was my limit. It also explained something my accountant never mentioned - that the SEP contribution itself creates a circular calculation (since the contribution reduces SE income which changes the contribution limit). The tool handles this automatically with some kind of iterative calculation. For anyone with multiple partnerships or businesses, I'd definitely recommend it. Saved me a ton of time trying to decipher IRS publications that don't clearly address multiple business scenarios!

If you're getting frustrated with your SEP calculations, just wait until you try calling the IRS for help! I spent THREE HOURS on hold last month trying to get clarification on almost this exact situation. After my third attempt, I found https://claimyr.com and their IRS callback service. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically they wait on hold with the IRS for you and call you once they reach an agent. I was skeptical, but after waiting on hold for literal hours myself, I figured it was worth a try. Got a call back in about an hour with an actual IRS agent on the line who walked me through the aggregation rules for SEP contributions across multiple businesses. Turns out I'd been doing my calculations wrong for YEARS.

Ok I have to admit I was totally wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to talk to someone at the IRS about my own SEP calculation issue. I used their service yesterday and was honestly shocked when I got a call about 45 minutes later with an actual IRS representative on the line. They connected me directly with someone in the business tax department who explained exactly how to handle the aggregation rules for multiple businesses. Turns out I've been calculating my SEP contributions incorrectly for the past two tax years, and I probably need to file amended returns. Not fun news, but at least now I know - and I didn't have to waste half a day on hold!

Just to add some clarity on the "each partner" question - the SEP contribution limit you calculate applies individually to each partner. So if your aggregate calculation shows a $10,429 limit (as the top comment suggested), that means YOU can contribute up to $10,429 to YOUR SEP IRA, and your partner would calculate their own limit (which would be the same in your case since you mentioned equal SE tax amounts). The contributions are made by the business on behalf of each partner, but they're tracked separately. And remember, the businesses don't have to contribute the maximum - that's just the ceiling.

Is anyone else confused about whether you can actually have multiple SEP IRAs? I thought you could only have one SEP account per person, even if the contributions come from multiple businesses. Am I missing something here?

Great question about the SEP IRA setup! You're absolutely right to be confused - the multiple business scenario isn't well explained in most resources. Here's what I learned after going through something similar: You do need to aggregate ALL your self-employment income across all businesses first, including losses. So your calculation would be: $121,254 (Business A) + $4,912 (Business B) - $65,783 (Business C) = $60,383 total net profit Then subtract your $6,100 in unreimbursed partnership expenses = $54,283 From there, subtract half your SE tax ($4,275 ÷ 2 = $2,138) = $52,145 adjusted net SE income Your SEP contribution limit would be 20% of $52,145 = approximately $10,429 per partner. This is your individual limit - your wife would calculate hers the same way. The businesses with SEPs can make these contributions for you, but you could also roll over funds between SEP accounts if needed. One thing that caught me off guard: make sure both businesses with SEPs contribute proportionally if you're going to max out. The IRS wants to see that SEP contributions don't discriminate between different employee classes, even when you're the only "employee.

This is such a timely question! I just went through this exact scenario with my CPA last month for my 2024 taxes. One thing I'd add to the excellent explanations already given - make sure you're using the correct self-employment tax calculation when you aggregate across multiple businesses. Since you mentioned having three partnership LLCs, each business should be reporting its share of SE income/loss on your personal return, and the SE tax gets calculated on the combined amount. Also, a heads up on timing: if you haven't already set up the SEP for Business C (the one with the loss), you might want to consider it for future years when it becomes profitable again. You can establish a SEP anytime before your tax filing deadline (including extensions), so there's flexibility there. The $10,429 limit that others calculated sounds right based on your numbers. Just remember that's your personal limit - your wife gets her own identical limit assuming she has the same SE income allocation from the partnerships. One last tip: keep detailed records of which business makes each SEP contribution. It'll make tax prep much easier next year, especially if you end up splitting contributions between Business A and B.