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Level 4
posted Apr 18, 2022 10:59:03 AM

Does a contribution to My SEP IRA reduce my self employment taxes in 2021

I am self employed as a sole proprietorship and the only employee. When I enter a contribution on line 19 of schedule C (Pension + Profit Sharing Plans) it changes the Federal Tax Due, and other amounts on Form 1040

 

I have read that a contribution to a  SEP IRA Does Not reduce self-employment tax. But in this example it does.

 

Please help - thanks in advance,

 

Tom

 

 

 

0 4 4874
4 Replies
Expert Alumni
Apr 18, 2022 11:16:33 AM

It is a deduction against your personal income on Schedule 1 line 16. 

Level 4
Apr 18, 2022 11:31:18 AM

 

Hey KrisD15

Thanks for your help, I just found out about this deduction in the past few days.

Would the answer be the same for other Self Employment Retirement Plans - such as: an IRA, a Simple IRA, etc.  ?

Many thanks for sharing your expertise.  Regards,

Tom

Expert Alumni
Apr 18, 2022 11:47:25 AM

That's correct.  The only thing that reduces SE tax is reducing specific SE income.

Level 4
Apr 18, 2022 11:48:47 AM

Thanks Alicia !