How to Correctly Deduct Self-Employed Retirement Plans

When you own your own business and you are a sole proprietor, you can set up a retirement plan for yourself and your employees if you have them.  Once you have set up a retirement plan, the contrbutions that you make for yourself are deductible on your tax return.  There are a few times of retirement plans that the IRS allows for sole proprietors, such as Simplified Employee Pension plans (SEPs) and Savings Incentive Match Plan for Employees Individual Retirement Account plans (SIMPLE IRA).  Which plan you choose is up to you and you should consult your tax or investment advisor for more information.  Generally these retirement plans are such that the current contributions are deductible and are not taxable to the employee until they are distributed.

If you have net profits from either a Schedule C or a Schedule F, then you may qualify for a deduction of your contributions to your retirment plan.  The deduction is the total cotributions to the plan.  You deduct this from your gross income on your tax return.  There are limits on this deduction.  There are also maximums that you are allow to contribute to self-employed retirement plans.  For more information about self-employed retirement plans you can see IRS Publication 560 or contact your tax professional.

 

Jessica Chisholm, CPA
Seattle/Bellevue Tax Accountants
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Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. Since 2002, he has owned his own small business, Huddleston Tax CPAs. He is a graduate of Washington State University and the University of Washington School of Law.

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Huddleston Tax CPAs of Seattle & Bellevue
Certified Public Accountants Focused on Small Business

(800) 376-1785
40 Lake Bellevue Suite 100, Bellevue, WA 98005

Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching, Quickbooks consulting, bookkeeping, payroll and business valuation services for small business. We serve Seattle, Bellevue, Redmond, Tacoma, Everett, Kent, Kirkland, Bothell, Lynnwood, Mill Creek, Shoreline, Kenmore, Lake Forest Park, Mountlake Terrace, Renton, Tukwila, Federal Way, Burien, Seatac, Mercer Island, West Seattle, Auburn, Snohomish and Mukilteo. We have a few meeting locations. Call to meet John Huddleston, J.D., LL.M., CPA, Tawni Berg, CPA, Jennifer Zhou, CPA, Jessica Chisholm, CPA or Chuck McClure, CPA. Member WSCPA.