1040-US: Maximum allowable SEP deduction

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IRS filing deadline update

The IRS MeF system is now processing returns, and the filing deadline has been extended to 11:59 PM on Wednesday, April 18, 2018. For the latest details, see UltraTax CS alerts and notices.


How do I calculate the maximum allowable SEP deduction?


Enter 2 in the Compute maximum allowable contribution field to calculate the maximum allowable SEP deduction. UltraTax CS automatically calculates the maximum deduction using the lesser of 20 percent (.25/1.25) of net earnings from self-employment or $53,000. Note that SEP plans are not eligible for catch-up contributions or elective deferrals.

In lieu of calculating the maximum allowable contribution use the Total SEP contributions field in Screen Keogh to enter known contributions to the plan. The same limitations apply for purposes of calculating the SEP plan deduction.

To adjust the amount of self-employment earnings UltraTax CS uses to calculate the self-employment deduction, enter an adjustment in the Adjustment to earned income field in Screen Keogh. Negative entries are treated as subtractions.

Related topic: Keogh, SEP, and SIMPLE contributions FAQs (1040)

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