Discussion:Does Foreign Earned Income Exclusion reduce base for calculating SEP contriubtion?
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Discussion Forum Index --> Advanced Tax Questions --> Does Foreign Earned Income Exclusion reduce base for calculating SEP contriubtion?
Discussion Forum Index --> Tax Questions --> Does Foreign Earned Income Exclusion reduce base for calculating SEP contriubtion?
| 1 February 2008 | |
| Taxpayer is consultant for fishing company, paid as independent contractor. Qualifies for Foreign Earned Income Exclusion based on being out of US for 330 days. In determining maximum SEP contribution he can make, does Sch C earnings get reduced by FEI Exclusion before applying 25% rate? | |
Death&Taxes (talk|edits) said: | 1 February 2008 |
| I believe it is the other way around. The SEP is a deduction of the Foreign Earned Income Exclusion, as is 50% of the SE tax......see Page 3, Line 44.....reduce exclusion by deductions applicable in computing AGI. | |
| 1 February 2008 | |
| The 25% Sec. 404 deduction is applied to gross income before the Sec. 911 exclusion is applied. See Reg § 1.415(c)-2(g)(5)(i).
Most deductions that are allocable to excluded income are disallowed. However, Reg §1.911-6(a) provides that qualified retirement plan contributions are not subject to this disallowance. Presumably, a SEP contribution would fall under this regulation provision. Traditional IRA deductions are limited to the amount of compensation included in gross income. | |
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