I have two Schedule C businesses. My health insurance is almost as much as the income. As I toy with the amount to contribute to my Keogh plan, I find that the first $1250 or so is fully deductible, and after that, the health insurance deduction goes down by 77.6% of the increase in the Keogh contribution.
I kinda get it, but why would it be 77.6%? Why not dollar for dollar? What's going on behind the scenes?
I think I figured out, that it has something to do with limiting contributions to 25% (effectively 20%) of net self-employment income. But with a solo 401(k) shouldn't I be able to contribute 100% up to $24,000 or thereabout (I'm over 50).
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