As Zbucklyo mentioned, for a self-employed individual, a special calculation must be done because, in determining the amount of which 25% is able to be contributed to a SEP IRA, net profit must effectively be reduced by the deductible portion of SE taxes and the amount of the SEP IRA contribution itself before multiplying by 25%. This result is equal to reducing net profit by the deductible portion of SE taxes and then multiplying by 20%.
