Question

Harvey is a self-employed accountant with earned income from the business of $120,000 (after the deduction for one-half of his self-employment tax). He uses a defined contribution Keogh plan. What is the maximum amount Harvey can contribute to his retirement plan in 2020

Answer 1

Answer: $24,000

Explanation:

Under the defined contribution Keogh plan, Harvey is allowed to contribute the lesser amount of either $57,000 or 20% of his self-employed income from business.

20% of income is;

= 20% * 120,000

= $24,000

This is less than the maximum of $57,000 and so is the amount that Harvey can contribute to his retirement plan.