Keogh Plan Contribution Calculator
Determines the maximum deductible contribution to a Keogh (self-employed) retirement plan, based on the plan's contribution rate and net self-employment income. The calculator computes self-employment tax and adjusts net earnings to reflect the deduction for one-half of that tax, then applies the IRC §401(a)(17) compensation cap and §415(c) contribution limit.
Self-employment tax is computed on 92.35% of self-employment income. The Social Security (OASDI) portion is capped at the SS wage base, reduced by any W-2 wages already subject to Social Security tax from other employment. Medicare tax has no wage base cap and applies to all net earnings from self-employment.
The self-employed adjustment (dividing the plan's stated rate by 1 + that rate) exists because a self-employed individual's own contribution reduces their own compensation base — unlike a common-law employee, whose contribution is calculated on compensation that already excludes the contribution itself.
If self-employment income is a loss, self-employment tax and the maximum contribution are both $0.
The Additional Medicare Tax (0.9% surtax on earned income above certain thresholds) is reported separately on Form 8959 and does not affect this calculation.