The maximum tax-deductible contribution an employer can take on a profit-sharing plan distribution is:

Question

Quizplus · Accepted Answer

The maximum tax-deductible contribution an employer can take on a profit-sharing plan distribution is 25% of all eligible employees' compensation. This limit is subject to an overall cap of $58,000 per employee for 2021 (IRS limit). Therefore, option A is incorrect as $25,000 is incorrect and less than the overall cap. Option C is incorrect as 50% of compensation is an unrealistic scenario. Option D is incorrect as the calculation is based on pre-tax profits, not after-tax profits.

The Maximum Tax-Deductible Contribution an Employer Can Take on a Profit-Sharing