Susan is a self-employed accountant with a qualified defined contribution plan (a Keogh plan).She has the following income items for the year: $$\begin{array} { l r }
\text { Earned income from self-employment } & \$ 50,000 \
\text { Dividend income } & 8,000 \
\text { Interest income } & 2,000 \
\text { Net short-term capital gain } & 12,000 \
\text { Adjusted gross income } & \$ 72,000
\end{array}$$ ? What is the maximum amount Susan can deduct as a contribution to her retirement plan in 2017, assuming the self-employment tax rate is 15.3%?

Question

Susan is a self-employed accountant with a qualified defined contribution plan (a Keogh plan).She has the following income items for the year: $$\begin{array} { l r } 
\text { Earned income from self-employment } & \$ 50,000 \
\text { Dividend income } & 8,000 \
\text { Interest income } & 2,000 \
\text { Net short-term capital gain } & 12,000 \
\text { Adjusted gross income } & \$ 72,000
\end{array}$$ ? What is the maximum amount Susan can deduct as a contribution to her retirement plan in 2017, assuming the self-employment tax rate is 15.3%?

Quizplus · Accepted Answer

The maximum amount Susan can deduct as a contribution to her retirement plan in 2017 is $46,468. This is because the maximum contribution limit for self-employed individuals is 100% of earned income, up to a maximum of $54,000. Susan's earned income is $50,000, so she can contribute up to $50,000 to her retirement plan. However, she is also subject to the self-employment tax rate of 15.3%, which reduces her maximum contribution limit to $46,468.

Susan Is a Self-Employed Accountant with a Qualified Defined Contribution