Bill is self-employed and has established a SEP retirement plan.Bill's net income for 2015 is $74,500.How much can Bill contribute to the SEP?

Question

Quizplus · Accepted Answer

The maximum contribution Bill can make to his SEP is 25% of his net income or $53,000 (whichever is less). In this case, 25% of $74,500 is $18,625, which is less than the maximum limit of $53,000. Therefore, choice C is the correct answer. Option A ($40,000) is incorrect as it is more than the maximum limit for this year. Option B ($17,000) and option D ($11,500) are not correct as they do not take into account the net income of Bill.

Bill Is Self-Employed and Has Established a SEP Retirement Plan