Deduction Limits for SEP-IRA Contributions
The deduction limits for employees also apply to self-employed persons.
However, self-employed persons must perform a special computation to figure their maximum deduction for contributions made to their own SEP-IRA.
For employees, the most you can deduct is the lesser of:
- Your contributions (including any excess contributions carryover) or
- 25% of the employee's compensation not to exceed $50,000 per participant for tax year 2012.
Note: The compensation you may consider for SEP contributions is limited to $250,000 in 2012.
Where to Deduct SEP Contributions
Contributions for yourself are deducted on:
- Form 1040, line 28.
Contributions made for employees are deducted on the business tax return:
- Sole proprietorships use Schedule C
- Partnerships use Form 1065
- C corporations use Form 1120
- S corporations use Form 1120S
- LLCs use Form 1065 unless an election was made for the entity to be taxed as a corporation. In which case, Form 1120 or 1120S would be used.
Due Date for Making Deductible Contributions
You have until the due date of your return (including extensions) to set up a SEP plan and make deductible contributions.
For Freelancers and independent Contractors
- Organzie your financial data into one central accounting system on the cloud
- Software kept up to date.
- Your data kept secure
- Anytime, anywhere data access.
- Pay your quarterly estimated taxes online.
- Export Schedule C to TurboTax at year-end for faster filing.
- Save up to 50% off QuickBooks Self-Employed. Track every deduction! Start your free trial now!
Have an accounting or bookkeeping question? Email it to me.
- Return to the Retirement Plans Table of Contents to find related links