Should I invest $10,000 in my SEP IRA, what effect would it have on my declared income for the year? How is the calculation made?
Thank you!
Any contribution to your SEP IRA would be limited to 25% of your compensation for the year or a minimum of $40,000 in self-employed income. Your taxable income would be reduced by $10,000, in this example, and the tax savings would be approximately $10,000 times the marginal rate your taxable income falls into (i.e. $1,200 tax savings in the 12% bracket).
