Phil glossed over the math. If you read the Internal Revenue Code, you will find that SEP deductions are indeed limited 25% of your net self-employment income. But your net self employment income is not the bottom line of your schedule C. You start with that, then subtract off the deduction for 1/2 of your Self Employment tax, AND you also subtract off the deduction for your SEP contribution.That's a bit of a circular calculation. But if you dust off your high school algebra, you'll find that 25% of your SE income after deducting the SEP contribution is the same as 20% of your SE income before deducting the SEP contribution.Hence, the usual short cut of saying your SEP is limited to 20% of your SE income. --Peter
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. Market data provided by Interactive Data.
Company fundamental data provided by Morningstar<