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Author: Fernkiller Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121144  
Subject: Re: Keough deduction question Date: 4/10/2000 4:35 PM
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See if this helps. Just take your net income from self-employment, subtract your deduction for 1/2 of the Self-employment tax, and multiply that by 20%.

Suppose you had $50,000 in net income, and you had a $6000 deduction for the SE tax. Subtract $3,000 (1/2 your deduction for the SE tax) from $50,000, and you get $47,000. Take 20% of that, and you get $9,400. That would be your Keogh contribution. You should get to the same number by walking through the IRS's procedure, but doing it that way it is very hard to see what is really going on. Perhaps someday the tax programs will address this problem. Every time I discover an overlooked business deduction that lowers my net income, I have to manually re-calculate the Keogh contribution. And, you don't want to over-contribute.
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