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Sorry to piggyback on someone else's thread, but I have a related question. The maximum percentage (or dollar amount) of SEP IRA contributions is the lesser of 25% or $42,000. But is the percent maximum applied on a per paycheck basis?

In other words, say I'm the sole shareholder and my S. Corp. has $5,000. Can I put $2,500 into my SEP IRA and pay myself a salary of $2,500 (i.e. 50% of my paycheck, forgetting taxes for the moment) as long at it does not take me over the ANNUAL percentage of 25% or 42k?
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