Your net profit is in the range where your contribution is subject to the little known limitation that your total contribution is not permitted to exceed net earnings reduced by your employer contribution. That works out to $18,000 of elective deferral plus $1,254 of employer contribution:
- Net profit = $22,067
- Self employment tax = $3,118
- The deduction for ½ SE tax = $1,559
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Net earnings = $20,508
- Net earnings minus the elective deferral = $20,508 - $18,000 = $2,508
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Employer contribution = ½ of $2,508 = $1,254
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Total contribution = $18,000 + $1,254 = $19,254
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Net earnings minus employer contribution = $20,508 - $1,254 = $19,254
