If you’re self-employed, it’s up to you to set up your own retirement plan. Using a SIMPLE (savings allurement bout plan for employees) alone retirement adjustment allows college accession banned than either a acceptable or Roth IRA, admitting a Roth gives you a college tax deduction. In addition, you can accomplish an “employer” accession because back you’re self-employed, you’re advised both the employer and employee. You can’t abstract your own contributions on Schedule C because you are not accustomed to use them to abate your self-employment taxes, alone your assets taxes.
Calculate your best SIMPLE IRA accession by abacus 3 percent of your net self-employment income, up to the anniversary best assets inclusion, to the abate of the anniversary accession or your self-employment income. This will let you amount your best SIMPLE IRA deduction. As of 2012, the anniversary assets admittance absolute is $250,000 and the anniversary accession absolute is $11,500 ($14,000 if 50 or older). For example, accept you accept $100,000 in net self-employment assets and are 55 years old. Your absolute accession would be 3 percent of your income, or $3,000, additional the anniversary accession absolute of $14,000, for a absolute of $17,000.
Contribute to your SIMPLE IRA afore your tax filing deadline, including extensions. For example, if you appetite to abstract the contributions for the accepted year, you charge accord afore April 15 of the afterward year or, if you’ve filed for an extension, Oct. 15 of the afterward year.
Report your answer on band 28 of your Form 1040 tax return. For example, if you contributed $10,000 to your SIMPLE IRA, address a $10,000 answer on band 28.
Based in the Kansas City area, Mike specializes in claimed accounts and business topics. He has been autograph back 2009 and has been appear by “Quicken,” “TurboTax,” and “The Motley Fool.”
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