Determine the maximum contribution that can be made to a Keogh plan in each of t

Question

Determine the maximum contribution that can be made to a Keogh plan in each of the following cases. In all instances, the individual is self-employed, and the self-employment tax reduction has already been taken. a. Self-employment income of $51,000 b. Self-employment income of $51,000 and wage income of $32,500 C. Self-employment income of $130,000. d. Self-employment income of $285,000. a. Maximum keogh plan contribution b. Maximum Keogh plan contribution C. Maximum Keogh plan contribution d. Maximum Keogh plan contribution

Explanation / Answer

As per chegg's policy I am allowed to answer only the first question so please don't mind and ask other questions separately.

Maximum plan Contribution is the minimum of 54000 and 25% of the income without Contribution plan I.e. Self employment income*0.25/1.25

So,

A) Maximum plan Contribution = 51000*0.25/1.25 = 10200

B) Same as A since wage income doesn't impact Maximum plan Contribution.

C) Maximum plan Contribution = 130000*0.25/1.25 = 26000

D) Maximum plan Contribution = minimum of 54000 and 285000*0.25/1.25 = 57000

Hence maximum plan Contribution = 54000

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