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Minimum Income Tax/ Simple IRA
Old 06-18-2005, 06:42 AM   #1
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Minimum Income Tax/ Simple IRA

Does anyone know what the maximum income allowable for a couple to place them at zero net federal taxes owed. Considering no usual deductions, no mortgage interest etc. I'm looking for that "sweet" number!

Also, correct me if I'm wrong, can a self employed individual w/ no employees open a SIMPLE IRA (which has a maximum contribution of ?10,500 / year) and can he/she have a self-employed income that is eg., 11,000k per year and thus pay no taxes on that income. I don't believe the SIMPLE is tied to a percentage of your income as is with a SEP IRA.

I believe with a SEP IRA it would be a percentage of the AGI to a max of ?42k contribution.

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Re: Minimum Income Tax/ Simple IRA
Old 06-18-2005, 07:15 AM   #2
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Re: Minimum Income Tax/ Simple IRA

The 10% tax bracket run from 0 to $14,600 for married filing jointly so the sweet spot of owing no federal taxes is totally dependent on your deductions. Standard deduction for married filing jointly is $10,000 for 2005. Personal exemptions at $3200 each so I put the sweet spot if you don't itemize at $16400.

The two types of retirement plans that work well for sole proprietorships to maximize contributions are Simple IRAs and Solo 401(k)s. Both allow "employee" contibutions up to a maximum of 100% of income. If I remember right the "employee" contribution for the Simple IRA is maxed out at $10,000 and the solo 401(k) at $14,000, plus any over 50 catch up contributions. There also is an employer contribution that can be made. Formulas get a bit complex. See this IRS fact sheet on Simple IRAs:,00.html

Don't forget if you are self employed, will always have to pay the self employment tax.

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