Compensation income for IRA contribution
1. If one is self-employed part time and contributes to a SE retirement plan, how is the maximum amount of compensation income determined for contribution to their IRA? Is it….
Line 31 Schedule C minus annual contribution to SE retirement plan, or,
Lime 31 of Schedule C minus annual contribution to SE retirement plan minus 1/2 SE tax?
2. If the SE individual did not contribute to a SE retirement plan, to determine the max compensation income from SE available to be contributed to their IRA, do they just use the amount on Schedule C line 31 or must they first subtract 1/2 SE tax from the line 32 amount?
TIA
Permalink Submitted by BruceM on Fri, 2022-11-18 22:51
Somehow missed it the first time, but Pub 590a saysSelf-employment income.If you are self-employed (a sole proprietor or a partner), compensation is the netearnings from your trade or business (provided your personal services are a material income-producing factor) re-duced by the total of:•The deduction for contributions made on your behalfto retirement plans, and•The deduction allowed for the deductible part of yourself-employment taxes.Compensation includes earnings from self-employmenteven if they aren’t subject to self-employment tax becauseof your religious beliefs.