Disclaimer: I am not an accountant and I am definitely not your accountant. You are correct to say that you can contribute 25% of compensation. However, your w

Disclaimer: I am not an accountant and I am definitely not your accountant. You are correct to say that you can contribute 25% of compensation. However, your wages are different than your profits, even as a self-employed person. Let's say you are self-employed and you make $1 of profits and pay yourself $0.80 of wages. You can contribute the other $0.20 you have to your SEP-IRA, since it's 25% of your wages (or 20% of your profits). Because of this, you need $275K of profits to generate $220K of income and a corresponding $55K SEP-IRA contribution. For more, see: https://en.wikipedia.org/wiki/SEP-IRA#Reduced_rate https://en.wikipedia.org/wiki/SEP-IRA#Reduced_rate