In 2015, 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 Amanda's maximum contribution to her profit-sharing Keogh plan, we need to follow these steps:

1. Calculate Amanda's net self-employment income:
Net self-employment income = Self-employment income - Above-the-line deduction for SE tax
Net self-employment income = $70,000 - $4,945
Net self-employment income = $65,055

2. Calculate Amanda's maximum contribution limit:
Maximum contribution limit = 20% of net self-employment income
Maximum contribution limit = 0.20 x $65,055
Maximum contribution limit = $13,011

Therefore, Amanda's maximum contribution to her profit-sharing Keogh plan is $13,011. The best choice is A.

In 2015, Amanda Earned $70,000 Self-Employment Income