My Schedule C income (all self employment) is $214,857. Why is the program only allowing $40,000 of SEP? In the past I have been able to do the full SEP?

[annacoryell · Accepted solution]

SEP Contributions an employer can make to an employee's SEP-IRA cannot exceed the lesser of: 20% of the employee's compensation, or. $53,000 (for 2015 and 2016, $54,000 for 2017). Make sure you subtract any business deductible tax from line 27 (I think that's the line) on your 1040 from your net profit that's on the Schedule C and then take 20% of that figure. The maximum is the lesser of that figure or $53K.

[dmertz]

The amount that must be subtracted as annacoryell indicated is the deductible portion of your self-employment taxes, reported on Form 1040 line 27.  Assuming that you have no W-2 job where you pay Social Security and Medicare taxes, your maximum SEP-IRA contribution is 20% * ($214,857 - $10,224) = $40,927.

[roseman1620]

Thankyou.