In 2017,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

Quizplus · Accepted Answer

To calculate the maximum contribution to Amanda's profit-sharing Keogh plan, we need to first calculate her net profit from self-employment income after deducting the above-the-line deduction for her SE tax.

Net profit from self-employment income = Self-employment income - Above-the-line deduction for SE tax

= $70,000 - $4,945

= $65,055

The maximum contribution Amanda can make to her profit-sharing Keogh plan is 20% of her net profit from self-employment income (or 25% if she elects to make contributions as an employer).

Therefore,

Maximum contribution = 20% x Net profit from self-employment income

= 20% x $65,055

= $13,011

Hence, the best choice is A) $13,011 as it is the maximum contribution Amanda can make to her profit-sharing Keogh plan based on the given information.

In 2017,Amanda Earned $70,000 Self-Employment Income