For most of my income, I am a W-2 worker. From this, I expect to earn about $78-$79K this year.
However, I also receive a smaller amount of 1099 income from a tutoring side hustle on Wyzant. An optimistic estimate says about $3,000, though it could be significantly less, and it could even possibly be slightly more.
I max out my 401k, tIRA and HSA. However, I am having trouble seeing anything that stops me from also opening SEP-IRA for the 1099 income and contributing any maximum to that.
So the first question is, am I correct? According to these numbers, and my situation, is my confidence that I can do this justified?
The other question is. I am having some trouble understanding the max contributions to the SEP-IRA. Here's what I gather so far:
+ Since I'm a self-employed, independent contractor, the percentage of income it's capped at is 20% of income, not 25% of income
+ Since 2{5,0}% of my income does not exceed $54,000, my contributions are capped at a percentage of income
+ When I say income in this case, it's not gross income, but net income, which means I remove self-employment tax first
This is where I get a little stuck. I'm not quite clear on how much self-employment tax is, and how or wether my W-2 income relates to it. How do I calculate it in my case?
I'm also curious as to your opinion on. I see this would likely amount to a couple hundred dollars in the SEP-IRA this year. In reference to this fact, am I being unreasonable in going through the trouble? Why or why not?