SEP IRA Contribution Limits for 2019 and 2020

SEP IRA Contribution Deadlines

The employer's tax return date plus extensions.

SEP IRA Information

A Simplified Employee Pension Plan (SEP) allows an employer to contribute on a tax-favored basis to IRAs owned by its employees. Under a SEP, a Traditional IRA is set up by or for an employee to accept the employer’s contributions.

How much can I contribute to my SEP IRA?

SEP employer contribution limits cannot exceed:

1. Up to 25% of compensation OR

2. $56,000 in 2019 ($55k in 2018)

	2019	2020
SEP Employer Contribution Limits	Up to 25% of compensation, with a maximum of $56,000*	Up to 25% of compensation, with a maximum of $57,000*
SEP Current Year Minimum Compensation Required	$600	$600

Eligibility for SEP IRAs

Any business, sole proprietor, partnership, or corporation is eligible.
Any employee that has reached age 21 and has worked for the employer in at least 3 of the last 5 years is eligible.

Other Important Information

Plan establishment and contribution can be made up until the employer’s tax return due date (plus extensions).
Employer contributions are discretionary and tax-deductible.
This plan is not subject to the reporting and disclosure requirements of most retirement plans.

SEP IRA Contributions for the Self-Employed

Calculating the SEP IRA contribution limit for self-employed persons is a bit more complex. Further details can be found in IRS Publication 560. Consult your tax advisor on this matter if it applies to you.

Frequently Asked Questions

What is a SEP IRA?

A SEP IRA is a Simplified Employee Pension IRA. A SEP IRA is designed for small business owners and self employed individuals to provide retirement benefits for themselves and their employees.

How much can I contribute to a SEP IRA?

The minimum contribution for a SEP IRA in 2020 is $600 for the current year. The maximum contribution is up to 25% of one’s compensation or up to $57,000 as of 2020.

Do you pay taxes on your SEP IRA?

Yes. SEP IRA contributions are taxed at the ordinary income rate when individuals make a withdrawal after age 59 ½. However, contributions may be deducted in each contribution year, thus lowering the taxpayer’s income liability for the contribution year. SEP IRA contributions may be rolled over to other IRA accounts tax free as well.

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SEP IRA Contribution Limits