What’s a SEP IRA?
A SEP-IRA (Simplified Employee Pension) is a retirement account for anyone who is self-employed, owns a business, or earns freelance income.
SEP-IRA is designed for anyone who is self-employed and doesn’t employ others.
Contribution Limits
- You can contribute up to 25% of your total compensation or a maximum of $66,000 for 2023 tax year or $69,000 for the 2024 tax year, whichever is less.
- If you’re self-employed, your contributions are generally limited to 20% of your net income. (Net compensation for self-employed individuals is generally the net profit from IRS Schedule C reduced by the deductible self-employment tax. The eligible compensation limit, indexed for inflation by the IRS, is $330,000 for 2023 or $345,000 for 2024.)
- Contributions are deductible and aren’t required every year.
- SECURE 2.0 allows employers of SEP-IRAs to offer the ability to make Roth contributions. Not all SEP IRA plans allow these contributions.
