Kathy is 48 years of age and self-employed. During 2018 she reported $500,000 of revenues and $100,000 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) $55,000.
B) $61,000.
C) $77,337.
D) $83,333.

Question

Quizplus · Accepted Answer

She may contribute the lesser of (1) $55,000 or (2) $95,837 [20% × ($400,000 − [((400,000 × 0.9235 - 128,400) × 2.9% × 50%) + (128,400 × 15.3% × 50%)])] + $18,500. Because she is not at least 50 years of age at the end of the year, she may not contribute an additional $6,000 as a catch-up adjustment.

Kathy Is 48 Years of Age and Self-Employed