Which retirement account provides favorable tax treatment for self-employed contributions?

Keogh plans, also known as HR10 plans, are specifically designed for self-employed individuals and small business owners. They offer favorable tax treatment for contributions, which allows participants to deduct contributions from their taxable income, reducing their overall tax liability for the year. The amount that can be contributed to a Keogh is also relatively high compared to other retirement accounts, enabling self-employed individuals to maximize their retirement savings while benefitting from tax deductions.

This tax treatment is particularly advantageous as it encourages self-employed individuals to save for retirement while managing their current tax burden. In contrast, other retirement accounts like 401(k)s and SIMPLE IRAs may have different contribution limits and eligibility requirements that are more geared toward employees of larger firms rather than self-employed individuals. Roth IRAs, while beneficial for tax-free growth, do not provide the same level of tax deductibility for contributions.