Question

Problem 19-38 (LO. 2, 4, 5, 6) In 2018, Susan's sole proprietorship earns $300,000 of self-employment net income (after the deduction for one-half of self-employment tax). a. The maximum amount that Susan can deduct for contributions to a defined contribution Keogh plan is $ 54,000 x Feedback Check My Work Self-employed individuals (e.g., partners and sole proprietors) and their employees are eligible to receive qualified retirement benefits under the SIMPLE plans or under what are known as H.R. 10 (Keogh) plans. Contributions and benefits of a self-employed person now are subject to the general corporate provisions, putting self-employed persons on a parity with corporate employees. Consequently, Keogh plans can provide a self- employed person with an adequate retirement base.

Answer 1

Contributions Susan make for 2018 to a common-law employee's SEP-IRA can't exceed the lesser of 25% of the employee's compensation or $55,000.
Lesser of 25% x 300,000 or $55000
maximum deductible contribution	55000