In 2016, Amanda earned $70,000 self-employment income. She was allowed a $4,945 above-the line deduction for her SE tax. Compute Amanda's maximum contribution to her profit-sharing Keogh plan.

Question

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Amanda can contribute the lesser of 20% of her self-employment income or $53,000 (the annual contribution limit for 2016). 20% of $70,000 is $14,000. Subtracting her above-the-line deduction of $4,945 for SE tax, Amanda's maximum contribution to her Keogh plan is $9,055. However, this amount is less than the minimum required contribution of $13,011 (which is computed using a separate formula). Therefore, the correct answer is choice A) $13,011, which is the minimum required contribution for Amanda's situation.

In 2016, Amanda Earned $70,000 Self-Employment Income