Kathy is 48 years of age and self-employed. During 2020 she reported $514,000 of revenues and $102,800 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)?
A)$57,000.
B)$63,500.
C)$79,931.
D)$19,500.

Question

Quizplus · Accepted Answer

The maximum contribution to an individual 401(k) for 2020 is $57,000, which includes both employee deferral and employer profit-sharing contributions. Kathy can contribute up to $19,500 as an employee deferral (plus an additional $6,500 catch-up contribution since she is over 50) and the remainder as an employer contribution, up to the $57,000 limit.

Kathy Is 48 Years of Age and Self-Employed