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Get your taxes done using TurboTax
It's not exactly 25% of earnings as a deduction. If you contribution rate is 25% then 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
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‎February 2, 2021
6:25 AM