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Is it possible to deduct SEP-IRA contributions from a Schedule C Form 1040? I was a sole proprietor with no employees. It seems like if I had employees, I would deduct it on line 19, for Pension and profit-sharing plans. But I'm not quite sure if I would be considered an employee.

This page: https://turbotax.intuit.com/tax-tools/tax-tips/Self-Employment-Taxes/Reporting-Self-Employment-Business-Income-and-Deductions/INF12031.html says that I should not deduct SEP-IRA contributions for myself on the Schedule C form. And that I should deduct it on my 1040. But I was under the impression I could make an employer contribution to a SEP-IRA.

I've tried both scenarios on TaxAct, and inputting the contribution as a business expense decreases both my state and federal taxes, while inputting it on my 1040 just decreases my state taxes.

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SEP IRA deduction goes to line 28 of your 1040, which is above the line (i.e.: pre-AGI). It should not be included in your taxable income (AGI) for Federal purposes.

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  • Thanks for the information. I looked over the worksheet on TaxAct they were getting their numbers from and it makes more sense. It looks like deducting it as a business expense raises the maximum allowed EITC. That was why I was saving money on Federal Taxes. But right now it looks like I don't qualify for the tax credit.
    – midfield99
    Commented Apr 14, 2014 at 4:38

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