The calculation is correct. According to the IRS, the deduction limit for self-employed individuals is first reduced by the deductible half of the self-employment tax and also by the SEP contribution before getting to the income amount that is multiplied by 25% to determine your maximum contribution.
If you made $100,000 from self-employment, less your deductible half of self-employment tax leaves you with $92,350. Now you have to do some circular math to determine your maximum deduction, but it turns out to be about $18,470 maximum deduction leaves your deduction limited to 25% of $73,890.
If you take it from the number you start with, as @fanfare stated, it is about 18.47% of your net income before any deductions. This is your SEP limit for self-employed individuals.
The amount is 18 % of your net income, after expense deductions.
Yes, and the limit of SEP-IRA contributions is supposed to be 25% of net income or $61,000, whichever is less. So with my 2021 contribution being 18% and well under $61,000, TurboTax is incorrectly telling me it is too high.
The proprietor (owner) cannot contribute 25%.
Your limit is around 18.3%.
you should stay below that or you will have an excess contribution into your SEP.
The calculation is correct. According to the IRS, the deduction limit for self-employed individuals is first reduced by the deductible half of the self-employment tax and also by the SEP contribution before getting to the income amount that is multiplied by 25% to determine your maximum contribution.
If you made $100,000 from self-employment, less your deductible half of self-employment tax leaves you with $92,350. Now you have to do some circular math to determine your maximum deduction, but it turns out to be about $18,470 maximum deduction leaves your deduction limited to 25% of $73,890.
If you take it from the number you start with, as @fanfare stated, it is about 18.47% of your net income before any deductions. This is your SEP limit for self-employed individuals.
@lmarsha1 Did you find a work around? I'm having the same problem.