Not quite. In order to equalize the situation between W-2 employees (who pay half of social security and medicare, with the other half paid by the employer) and self-employed (who pay both halves through self-employment tax), there is an additional adjustment. You have to subtract half your SE tax from your net profit. For example, if your net profit is $10,000, your SE tax will be $1530. That means that your eligible "compensation" for contributing to a retirement plan is $9,235.
