Kathy is 60 years of age and self-employed. During 2017, she reported $100,000 of revenues and $40,000 of expenses relating to her self-employment activities. If Kathy has no other retirement accounts in her name, what is the maximum amount she can contribute to an individual 401(k) for 2017? (Round your final answer to the nearest whole number)
A) $35,152.
B) $60,000.
C) $54,000.
D) $29,152.

Question

Quizplus · Accepted Answer

Kathy can contribute up to $18,000 as an employee contribution (plus an additional $6,000 catch-up contribution since she is over 50), and 20% of her net self-employment income ($60,000 - $40,000 = $20,000, then 20% of $20,000 = $4,000) as an employer contribution. Total: $18,000 + $6,000 + $4,000 = $28,000. However, the maximum contribution limit for 2017 is $54,000, so she can contribute up to $35,152 ($54,000 - $18,000 - $6,000 = $30,000, but limited by her net income).

Kathy Is 60 Years of Age and Self-Employed