Earlier this year, I worked hard to keep my AGI under $100,000 so I could qualify for a Roth and convert my traditional IRA to Roth. I have done so.
This week I learned that a SEP can also be converted to a Roth (no thanks to my Financial Advisor at a big brokerage that shall remain nameless but whose initials are ML).
My question is this. I made a $9000 contribution to my SEP this tax year. That comes off the top of my self-employed income on Schedule C. Ergo, my AGI stays below $95K for tax year 1998.
If I convert the SEP to a Roth, can I still deduct the $9000 on schedule C; recognizing of course that taxes will be due on the lump sum disbursement of the SEP?
For a traditional IRA, which is an adjustment to income on the front of the 1040 form, conversion to a Roth means that the deduction may not be made.
In the case of Schedule C, contribution to a retirement account might still be considered a business expense.
The Catch-22 in all this is that: if the SEP contribution is NOT deductible as a business expense, then my MAGI will be above the allowable $100k limit.
Another question: How about if I don't convert my entire SEP to a Roth? Any way I can avoid increasing my MAGI that way?
Advice would be greatly appreciated. I have scoured the web, IRS instruction, etc. and can find support to argue both ways.

Your SEP contribution will remain deductible (keeping you under the $100k limit) even if the underlying IRA is converted to a Roth IRA. A conversion is not the same thing as a recharacterization (and incidently, a SEP can't be recharacterized). So youy should be okay.

Maybe I'm reading your question wrong, but aren't you taking the SEP deduction in the wrong place?

You said your SEP contribution comes off the top on Schedule C of your self-employed income. The deduction for any of your employees comes off the Schedule C but the deduction for the self-employed individual is taken off on the 1040 based on your Schedule C Net Profit minus 1/2 SE taxes times an adjusted percentage to make the math work out. The deduction is taken on 1040 on the line that references KEOGH and I believe there is also a box identifying if it is to a SEP. If you put the numbers in the correct places you may exceed the limits by more than you think. Am I missing something?

Yes, you're right. I am self-employed and the SEP deduction does come off the front of the 1040. My question still remains, though, can I contribute to an existing SEP, use the contribution as an adjustment to income, and still qualify for the Roth?
If I can't use the contribution as an adjustment to income and convert to a Roth, then, can I use this year's contribution as an adjustment and convert previous years SEP to a Roth?
Then, I could stay under the 100K limit and at least make a partial conversion to the Roth.