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I have some self-employed income this year and I have two choices with my tax return:

1. I can claim all my expenses and deductions and show a profit of $2500 or so, limiting my SIMPLE IRA contribtution to $2300. BUT with this return I get a refund of $1000.


2. I can juggle some numbers around and NOT claim all my expenses and show a profit of $6500. This will allow me to make the full $6300 contribution. However I will break even on my tax return (no refund) because of the extra self-employment tax.

Which is better for the long term?

Say I have the same amount of money to put in the market either way. If the SIMPLE is not helping me take a bite out of my tax bill this year, is it still worth it to try and fully fund it? Assuming equal dollars invested in a stock held in a SIMPLE IRA account vs. held in a normal taxable account, as long as I don't sell the stock till retirement, there is no difference, right? Or am I thinking about this the wrong way... Actually in choice one I would have an extra 1000 bucks to invest.

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