| Course | GF592 Income Tax Planning and Strategies |
|---|---|
| Unit | Unit 8 |
| Paper type | Retirement account comparison |
| Length | About 870 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Finance |
| Updated | October 2026 |
Free sample paper for GF592 Unit 8
A Deduction Worth Less Than Its Bracket: A Unit 8 Retirement Account Comparison for a Consultant
[Student Name]
Purdue University Global
GF592: Income Tax Planning and Strategies
Unit 8 Retirement Account Comparison
[Instructor Name]
[Date]
The consultant, the household and all amounts are composite and illustrative; limits and rates are federal figures for tax year 2025; the sources cited are real.
The Facts
The consultant files jointly with a spouse who earns $185,000 in wages. The consultant's net profit is $142,000 for tax year 2025. Their combined taxable income places them in the 24 percent bracket for every contribution considered, and below the $394,600 joint threshold where limits on the qualified business income deduction begin.
Capacity: SEP-IRA or Solo 401(k)
Capacity is settled first, because the account that can hold more money shapes every later choice (Internal Revenue Service, 2025a).
1. Net earnings from self-employment: $142,000 times 92.35 percent, or $131,137.
2. Self-employment tax: $131,137 times 15.3 percent, or $20,064. Half, $10,032, is deductible.
3. Plan compensation: $142,000 less $10,032, or $131,968.
4. Employer contribution at 20 percent of plan compensation: $26,394. This is the entire SEP-IRA limit for this consultant.
5. Solo 401(k): the same $26,394 employer contribution plus an employee deferral of up to $23,500 for 2025, a total of $49,894.
The solo 401(k) holds almost twice as much. It also allows the employee deferral to be designated as Roth, which a SEP-IRA traditionally has not offered in practice. The comparison therefore centers on the solo 401(k), and the question becomes whether the $23,500 employee deferral should be traditional or Roth.
The Rate Analysis
A traditional deferral of $23,500 reduces taxable income by $23,500, saving $5,640 at 24 percent. But for a sole proprietor, contributions to the owner's own retirement plan also reduce qualified business income. The deduction for that income is 20 percent of it, so a $23,500 deferral cuts the deduction by $4,700 and adds that amount back to taxable income (Internal Revenue Service, 2025b). At 24 percent, that costs $1,128.
The traditional deferral's net saving is $5,640 less $1,128, or $4,512, an effective rate of 19.2 percent rather than the 24 percent bracket, because every dollar deferred also removes 20 cents of qualified business income deduction.
A Roth deferral gets no deduction now, but it also leaves the qualified business income deduction untouched, and its qualified withdrawals are never taxed.
The Withdrawal-Side Estimate
The comparison turns on the rate expected when the money comes out. The couple's projected retirement income includes the spouse's pension of about $48,000 a year, Social Security for both, and required distributions from their existing traditional accounts. These place them, in today's terms, around the 22 percent bracket in retirement.
If traditional money saves 19.2 percent now and is taxed at 22 percent later, it loses. On each year's $23,500 deferral, the Roth version comes out ahead by about 2.8 percent of the amount, roughly $658, before growth; with growth, the advantage scales with the account's value.
Why the Answer Is Close and Still Worth Making
The gap between 19.2 and 22 percent is under three points, and a reasonable planner could call it a coin toss. Three things make the Roth choice the better bet for this couple. First, their retirement estimate does not yet include the required distributions their large traditional balances will force in their seventies, which tend to push income higher, not lower. Second, a surviving spouse files as a single taxpayer, with narrower brackets, so the same income can be taxed at a higher rate after one of them dies. Third, Roth money has no required distributions during the owner's life, which gives them more control over taxable income later. Each of these points the same way, so the recommendation does not rest on the rate estimate alone.
The Recommendation
Open a solo 401(k). Designate the employee deferral of $23,500 as Roth. Keep the employer contribution of $26,394 pre-tax. The same arithmetic would favor Roth there too, but only narrowly, and many solo 401(k) providers do not yet offer the Roth employer option that federal law has allowed since 2023. Holding both kinds of money also hedges against a future tax rate nobody can know.
Research on employees offered Roth accounts found that they did not contribute less when the tax was paid up front, which suggests the Roth choice does not have to cost savings (Beshears et al., 2017).
What Would Reverse the Recommendation
If the couple expected to be in a bracket below 19.2 percent in retirement, the traditional deferral would win. That could happen if one spouse died early, if they moved to a lower-tax state and lived mainly on Roth money, or if Congress lowered rates. If their combined taxable income rose above the $394,600 threshold, the qualified business income interaction would change and the whole comparison would have to be run again from the capacity table down.
Checks
Self-employment tax is computed before the plan contribution, because the contribution does not reduce it. The employer percentage is applied to plan compensation after half of self-employment tax, not to net profit. The total contribution of $49,894 is below the 2025 overall limit of $70,000.
References
Beshears, J., Choi, J. J., Laibson, D., & Madrian, B. C. (2017). Does front-loading taxation increase savings? Evidence from Roth 401(k) introductions. Journal of Public Economics, 151, 84-95. https://doi.org/10.1016/j.jpubeco.2015.09.007
Internal Revenue Service. (2025a). Retirement plans for small business (Publication 560). https://www.irs.gov/publications/p560
Internal Revenue Service. (2025b). Instructions for Form 8995: Qualified business income deduction simplified computation. https://www.irs.gov/instructions/i8995
GF592 Unit 8 instructions, in plain terms
Unit 8 of GF592 sets up a retirement contribution decision for a self-employed client and asks you to compare account types and tax treatment. Settle capacity first: compute net earnings from self-employment, the deductible half of self-employment tax and plan compensation, then the limit for each plan type. Once the larger account is chosen, analyze the rate a traditional contribution really saves, including any deduction it shrinks. Then estimate the rate the money would face on withdrawal, using the client's expected pension, Social Security and required distributions. State the comparison in percentages and dollars. Because such comparisons are often close, explain what makes the recommendation the better bet and what would reverse it. Give a concrete recommendation that names which contributions go Roth and which stay pre-tax, and include checks on the order of the computation and the overall limit. Cite IRS Publication 560 and the Form 8995 instructions in APA 7.
How this GF592 Unit 8 example is built
The facts section gives both incomes and confirms the household is below the $394,600 joint threshold for the business income deduction. A numbered capacity section runs from $131,137 of net earnings through $20,064 of self-employment tax to $131,968 of plan compensation, then compares the SEP limit with the solo 401(k) total. The rate analysis computes the $5,640 saving, subtracts the $1,128 of lost business income deduction and reaches 19.2 percent, stated in the highlighted sentence. The withdrawal estimate places the couple near the 22 percent bracket in retirement. A section on why the close answer still matters names required distributions, the narrower single brackets for a surviving spouse and the absence of lifetime distributions from Roth money. The recommendation splits the contributions, and Beshears and colleagues' study of Roth introductions addresses whether paying tax up front lowers saving. Reversal conditions and computation checks close the comparison.
Reading the GF592 Unit 8 grading rubric
The capacity computation is the first thing graded in this GF592 comparison, since an error in self-employment tax or plan compensation changes every later figure. Instructors then look for the key insight of the unit: that a pre-tax contribution by a sole proprietor shrinks the business income deduction, so its value falls below the bracket. A submission that compares 24 percent now with 22 percent later has missed the point and reaches the opposite answer. The withdrawal-side estimate is scored on whether it uses the client's actual expected income sources. Because the gap is small, credit goes to submissions that explain why the recommendation holds and name the facts that would reverse it. A specific split between Roth and pre-tax money earns more than a general preference. Computation checks show professional care, and IRS Publication 560, the Form 8995 instructions and the savings study, cited in APA 7, support the analysis.
Common GF592 Unit 8 mistakes, and how to avoid them
Errors in GF592 Unit 8 often start with capacity. Students apply the 20 percent employer rate to net profit instead of plan compensation, or reduce plan compensation by the full self-employment tax rather than half. Some treat the SEP-IRA and solo 401(k) as equal without computing the employee deferral. The biggest analytical miss is comparing the bracket rate with the retirement rate and ignoring the business income deduction, which turns a Roth recommendation into a traditional one. Withdrawal estimates are frequently guesses rather than sums of the client's pension, Social Security and required distributions. Many papers present a close comparison as decisive, or as so close that no recommendation is given. Check whether the household sits below the business income threshold before using the 20 percent deduction, and confirm the total contribution stays under the overall limit for the year your prompt names.
Get a GF592 Unit 8 example written to your instructions
Send the net profit, filing status, other household income and any plan documents from your GF592 Unit 8 case, the year it is set in, and the rubric. Back comes a comparison that computes each account's capacity, prices the deduction now against withdrawals later, and states the break-even rate at which the choice flips. No charge for the first; 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GF592 Unit 8 questions, answered
Why does a pre-tax contribution reduce the business income deduction?
Because the deduction is generally computed on qualified business income after deductions attributable to the business, and a self-employed person's retirement contributions count among them. Each dollar deferred pre-tax therefore lowers the base by a dollar and the deduction by twenty cents. The sample shows that reduction in dollars before comparing it with the Roth alternative.
Does this analysis apply above the income threshold?
Not in the same form. Above the threshold, and especially for a specified service business such as consulting, the business income deduction phases down or disappears, which changes the value of deducting now. The sample's household sits below the 394,600 joint threshold for the named year, and the comparison states that condition explicitly.
Why not simply split contributions between Roth and traditional?
Splitting is defensible as a hedge when the expected retirement rate is uncertain, and the sample mentions it. But the rate analysis gives a clear answer at these figures, 19.2 percent now against 22 later, so the recommendation follows it and names the threshold rate below which a traditional deferral would win instead.
Where can I find a free GF592 Unit 8 sample paper?
This page carries a full GF592 Unit 8 retirement account comparison for a self-employed consultant, with SEP and solo 401(k) capacity, the 19.2 percent effective saving, a withdrawal-rate estimate and APA 7 references.
Why is the traditional deferral worth only 19.2 percent in GF592 Unit 8?
A $23,500 traditional deferral saves $5,640 at 24 percent, but it also lowers qualified business income, cutting the 20 percent deduction by $1,128. The net saving is $4,512, which is 19.2 percent of the amount deferred.