AMA Plan Established Under the Keogh Law
In 1962, Congress passed the "Self-Employed Individuals Tax Retirement Act," commonly referred to as the Keogh-Smathers Law, or Keogh Law. Under this law the self-employed individual can establish a retirement plan and make annual contributions of an amount up to 10% of his annual earned net income from self-employment or $2,500, whichever is less, to a retirement fund set up under a qualified plan. Half of this annual contribution is deductible for federal income tax purposes.The law requires that contributions also must be made on behalf of all eligible employees with three or more years service. These contributions are tax deductible by the employer.
Amendment to Keogh Law
Pursuant to a 1966 amendment to the Keogh Law, which is effective for taxable years beginning after 1967, any Employer may deduct, in respect to any fiscal year, the full amount of the allowable