5.   Table and Worksheets for the Self-Employed

Table of Contents

As discussed in chapters 2 and 4, if you are self-employed, you must use the rate table or rate worksheet and deduction worksheet to figure your deduction for contributions you made for yourself to a SEP-IRA or qualified plan.

First, use either the rate table or rate worksheet to find your reduced contribution rate. Then complete the deduction worksheet to figure your deduction for contributions.

The table and the worksheets in chapter 5 apply only to self-employed individuals who have only one defined contribution plan, such as a profit-sharing plan. A SEP plan is treated as a profit-sharing plan. However, do not use this worksheet for SARSEPs.

Rate table for self-employed.   If your plan's contribution rate is a whole percentage (for example, 12% rather than 12½%), you can use the table on the next page to find your reduced contribution rate. Otherwise, use the rate worksheet provided below.

  First, find your plan contribution rate (the contribution rate stated in your plan) in Column A of the table. Then read across to the rate under Column B. Enter the rate from Column B in step 4 of the Deduction Worksheet for Self-Employed on this page.

  

Example.

You are a sole proprietor with no employees. If your plan's contribution rate is 10% of a participant's compensation, your rate is 0.090909. Enter this rate in step 4 of the Deduction Worksheet for Self-Employed on this page.

Deduction Worksheet for Self-Employed

  Step 1      
    Enter your net profit from line 31, Schedule C (Form 1040); line 3, Schedule C-EZ (Form 1040); line 34, Schedule F (Form 1040)*; or box 14, code A**, Schedule K-1 (Form 1065)*. For information on other income included in net profit from self-employment, see the Instructions for Schedule SE, Form 1040.  
    *Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b.  
    **General partners should reduce this amount by the same additional expenses 
subtracted from box 14, code A to determine the amount on line 1 or 2 of 
Schedule SE.
 
  Step 2      
    Enter your deduction for self-employment tax from Form 1040, line 27  
       
  Step 3      
    Net earnings from self-employment. Subtract step 2 from step 1  
  Step 4      
    Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed  
  Step 5      
    Multiply step 3 by step 4  
  Step 6      
    Multiply $255,000 by your plan contribution rate (not the reduced rate)  
  Step 7      
    Enter the smaller of step 5 or step 6  
  Step 8      
    Contribution dollar limit $51,000
    If you made any elective deferrals to your self-employed plan, go to step 9.    
    Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21.    
  Step 9      
    Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan during 2013. Do not enter more than $17,500  
  Step 10      
    Subtract step 9 from step 8  
  Step 11      
    Subtract step 9 from step 3    
  Step 12      
    Enter one-half of step 11  
  Step 13      
    Enter the smallest of step 7, 10, or 12  
  Step 14      
    Subtract step 13 from step 3  
  Step 15      
    Enter the smaller of step 9 or step 14  
    If you made catch-up contributions, go to step 16.    
    Otherwise, skip steps 16 through 18 and go to step 19.    
  Step 16      
    Subtract step 15 from step 14  
  Step 17      
    Enter your catch-up contributions (including designated Roth contributions), if any. Do not enter more than $5,500  
  Step 18      
    Enter the smaller of step 16 or step 17  
  Step 19      
    Add steps 13, 15, and 18.  
  Step 20      
    Enter the amount of designated Roth contributions included on lines 9 and 17.  
  Step 21      
    Subtract step 20 from step 19. This is your maximum deductible contribution.  
           
  Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Form 1040, line 28.  

Rate worksheet for self-employed.   If your plan's contribution rate is not a whole percentage (for example, 10½%), you cannot use the Rate Table for Self-Employed. Use the following worksheet instead.

Rate Worksheet for Self-Employed

1) Plan contribution rate as a decimal (for example, 10½% = 0.105)  
2) Rate in line 1 plus 1 (for example, 0.105 + 1 = 1.105)  
3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0.105 ÷ 1.105 = 0.095)  

Figuring your deduction.   Now that you have your self-employed rate from either the rate table or rate worksheet, you can figure your maximum deduction for contributions for yourself by completing the Deduction Worksheet for Self-Employed.

Community property laws.   If you reside in a community property state and you are married and filing a separate return, disregard community property laws for step 1 of the Deduction Worksheet for Self-Employed. Enter on step 1 the total net profit you actually earned.

Rate Table for Self-Employed

Column A  
If the plan contri- 
bution rate is: 
(shown as %)
Column B  
Your 
rate is: 
(shown as decimal)
1 .009901
2 .019608
3 .029126
4 .038462
5 .047619
6 .056604
7 .065421
8 .074074
9 .082569
10 .090909
11 .099099
12 .107143
13 .115044
14 .122807
15 .130435
16 .137931
17 .145299
18 .152542
19 .159664
20 .166667
21 .173554
22 .180328
23 .186992
24 .193548
25* .200000*
*The deduction for annual employer contributions (other than elective deferrals) to a SEP plan, a profit-sharing plan, or a money purchase plan cannot be more than 20% of your net earnings (figured without deducting contributions for yourself) from the business that has the plan.

Example.

You are a sole proprietor with no employees. The terms of your plan provide that you contribute 8½% (.085) of your compensation to your plan. Your net profit from line 31, Schedule C (Form 1040) is $200,000. You have no elective deferrals or catch-up contributions. Your self-employment tax deduction on line 27 of Form 1040 is $9,728. See the filled-in portions of both Schedule SE (Form 1040), Self-Employment Income, and Form 1040, later.

You figure your self-employed rate and maximum deduction for employer contributions you made for yourself as follows.

Deduction Worksheet for Self-Employed

  Step 1      
    Enter your net profit from line 31, Schedule C (Form 1040); line 3, Schedule C-EZ (Form 1040); line 34, Schedule F (Form 1040)*; or box 14, code A**, Schedule K-1 (Form 1065)*. For information on other income included in net profit from self-employment, see the Instructions for Schedule SE, Form 1040. $200,000
    *Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b.  
    **General partners should reduce this amount by the same additional expenses 
subtracted from box 14, code A to determine the amount on line 1 or 2 of 
Schedule SE.
 
  Step 2      
    Enter your deduction for self-employment tax from Form 1040, line 27 9,728
       
  Step 3      
    Net earnings from self-employment. Subtract step 2 from step 1 190,272
  Step 4      
    Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed 0.078
  Step 5      
    Multiply step 3 by step 4 14,841
  Step 6      
    Multiply $255,000 by your plan contribution rate (not the reduced rate) 21,675
  Step 7      
    Enter the smaller of step 5 or step 6 14,841
  Step 8      
    Contribution dollar limit $51,000
    If you made any elective deferrals to your self-employed plan, go to step 9.    
    Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21.    
  Step 9      
    Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan during 2013. Do not enter more than $17,500 N/A
  Step 10      
    Subtract step 9 from step 8  
  Step 11      
    Subtract step 9 from step 3    
  Step 12      
    Enter one-half of step 11  
  Step 13      
    Enter the smallest of step 7, 10, or 12  
  Step 14      
    Subtract step 13 from step 3  
  Step 15      
    Enter the smaller of step 9 or step 14  
    If you made catch-up contributions, go to step 16.    
    Otherwise, skip steps 16 through 18 and go to step 19.    
  Step 16      
    Subtract step 15 from step 14  
  Step 17      
    Enter your catch-up contributions (including designated Roth contributions), if any. Do not enter more than $5,500  
  Step 18      
    Enter the smaller of step 16 or step 17  
  Step 19      
    Add steps 13, 15, and 18.  
  Step 20      
    Enter the amount of designated Roth contributions included on lines 9 and 17  
  Step 21      
    Subtract step 20 from step 19. This is your maximum deductible contribution $14,841
           
    Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Form 1040, line 28.  

See the filled-in Deduction Worksheet for Self-Employed on this page.

Rate Worksheet for Self-Employed

1) Plan contribution rate as a decimal (for example, 10½% = 0.105) 0.085
2) Rate in line 1 plus 1 (for example, 0.105 + 1 = 1.105) 1.085
3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0.105 ÷ 1.105 = 0.095) 0.078

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Portion of Form 1040 and Portion of Schedule SE


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