Calculate the maximum contribution to a SEP plan

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Problem -

1. Lewis, a self-employed individual, has net earned income of $50,000 in 2019. If Lewis has no employees, calculate the maximum contribution to a SEP plan that he may deduct from his adjusted gross income.

2. During 2019, Linda, age 32, has a salary of $40,000. She participates in a Section 401(k) plan and chooses to defer 25 percent of her compensation.

i. What is the maximum amount Linda can contribute to the Section 401(k) plan on a tax-deferred basis?

ii. If Linda's salary was $125,000, instead of $40,000, what is the maximum amount that she could contribute to the Section 401(k) plan on a tax-deferred basis?

Reference no: EM132674899

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