The deduction is not exactly the percentage you have chosen to use to multiply by your earnings as a deduction. If your contribution rate is 25% then the deduction rate for self-employed is 20%.
Deduction Limit for Contributions for Self-Employed:
If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment, which takes into account both the following deductions.
- The deduction for the deductible part of your self-employment tax, or
- The deduction for contributions to your own SEP-IRA.
- See the image of the rate table below.
- For more information you can use the worksheets and information in IRS Publication 560
Once your self-employment income is entered follow the steps here to enter your SEP-IRA:
- In your return, type SEP IRA contributions (use the whole phrase) in the Search box (upper right) > Press Enter.
- Select the Jump to link at the top of the search results.
- This will take you to the Self-Employed Retirement Plans screen.
- If you get a message that Self-Employed Retirement Plans are only for self-employed individuals, this means that you have not entered any self-employed income.
- TurboTax will ask you about whether you contributed to different types of retirement plans. Select Yes to Keogh, SEP, and SIMPLE Contributions.
- On the Your Contributions screen, you’ll be able to input your SEP IRA contributions.
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