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Andrew Schwartz CPA
Feb 4, 2009 - 9:52AM
Re: SEP Question

The amount you can contribute into a SEP is equal to 20% of your net self-employment income.

So you first need to subtract your expenses against your income to calculate net self-employment income. You then subtract 50% of your self-employment tax from that amount, and then multiply that figure by 20% to figure out your maximum SEP contribution.

Make sure to deduct your SEP contribution as an Adjustment to Income on the bottom of page 1 of the 1040. You will not claim your SEP contributions as a deduction on your Schedule C.

I hope this answers your question.

Zip Code: 01801

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