SEP for the Self Employed

[Guest wjr]

I have read several things since the Technical Correction that says the SEP limit is now 25% of "grossed-up" compensation. What does that mean?

For the self-employed, is it 25% of includible compenation, after the contribution (or 20% of compensation before the contribution), as figured previously?

[Gary Lesser]

Assuming 1/2 of the SE tax and non-owner contributions are known, then the 25% exclusion limit is 20% of the remaining EI (up to $40,000) plus $1,000 if catch up applies. The employer's deduction limit is higher (but if overage allocated, the amount can not be allocated to this participant).