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Deducting Matching and Nonelective Contributions

Employer matching or nonelective contributions:

Employees:

Contributions made by the employer for employees (matching or nonelective contributions) are deducted directly from business income on the appropriate business return.

  • Sole proprietors use Schedule C (or Schedule F for farming)
  • Partnerships use Form 1065
  • C corporations use Form 1120
  • S corporations use Form 1120S

Self-Employed Persons:

If your self-employed, you deduct contributions to your own SIMPLE IRA on Form 1040, line 28 in arriving at your adjusted gross income. In other words, contributions for yourself are not deducted as a business deduction on Schedule C.

Timing Deductions for Contributions

You can deduct contributions for a particular tax year if they are made for that tax year and are made by the due date (including extensions) of your federal income tax return for that year.

For example, if you're a sole proprietor on a calendar year, your 2012 return is due on April 15, 2013, plus extensions.

Contributions to your SIMPLE IRA made in 2012 or by April 15, 2013, plus extensions, are deductible for tax year 2012.

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