BillM223
Expert Alumni

Retirement tax questions

The total amount of what you are able to deduct of your contributions to your 401(k) as a self-employed taxpayer is limited to your "net earnings from self-employment" which is your net profit from Self-employment less the deductible portion of self employment tax. If you have elective deferrals (which I think you did - this is the amount deferred from your Net self-employment income). then the total amount that can be deducted is limited to your net earnings from self-employment (see above), which I imagine is less that you expected.

 

If you are using the desktop (download) version of TurboTax, you can see how line 15 on Schedule 1 (1040) is calculated on a worksheet entitled "Keogh/SEP Wks" (yes, despite the name of the worksheet, Part III is the Detail of the Maximum Allowable Deduction ... for Individual 401(k) Plans).

 

So if your elective deferral equals or exceeds your net earnings from self-employment, then no amount of the employer's  contribution will be added in.

 

This is explained in Chapter 6 in IRS Pub 560,(note: this is still the 2020 version) in looking at ."Table and Worksheets for the Self-Employed" starting on page 24 and following.

 

@lmelvoin

@mweeconsulting

 

[Edited 1/10/2022 8:50 pm CST, completed the last sentence in the first paragraph which was left incomplete in the original answer]

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