How much can I contribute to my SEP account?
April 28, 2003
Date: Sun, 2 Mar 2003
Dear Mr. Gray,
I saw on the internet where you had helped someone with a SEP-IRA question. I am at my wits end looking for an answer to my question. I am an un-incorporated, sole proprietor. I have no employees. I have a SEP-IRA. I have $100,000 in income. I would like to contribute 25% ($25,000) into my SEP-IRA.
I looked at the worksheet from the IRS to calculate my deduction. It looks like I am only able to deduct 20% ($20,000). I was wondering if I am approaching this correctly. And, how do I address the remaining 5% ($5,000) of my contribution?
I have looked at so many websites that say you can contribute anywhere from 15-25% and that you can deduct anything in that range. Even the IRS's website doesn't seem to provide any definitive answer. Any assistance you can provide would be greatly appreciated.
Date: 04 Apr 2003
The SEP contribution and the deductible 1/2 of your self-employment tax are both subtracted from your other self-employment income to determine your maximum SEP contribution. Rough and dirty, $100,000 - $20,000 = $80,000 X 25% = $20,000.
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