What is the minimum and maximum deductible contribution that I may make to my SEP-IRA?
Despite their name, simplified employee plans (SEPs) can also be used by the self-employed. Under the SEP rules, a self-employed person is treated both as the employee and the employer. Your contributions to your SEP-IRA cannot exceed the lesser of: • $30,000, or • 15 percent of your net earnings from self-employment. In determining your net earnings, the deduction to your own SEP-IRA must be subtracted. However, the maximum SEP-IRA cannot be computed until net earnings are determined. In other words, the deduction amount and the net-earnings amount are each dependent on the other. Because of these circular calculations, it works out that the maximum percentage of net earnings that you can contribute and deduct to your own SEP-IRA is 13.0435 percent. Remember also that in determining net earnings from self-employment, the 50 percent deduction for self-employment tax is also taken into account. So while you owe the IRS self-employment taxes which, in effect, make up for the employment t
