A Simplified Employee Pension Plan (SEP) allows an employer to contribute on a
SEP employer contribution limits cannot exceed:
1. Up to 25% of compensation OR
2. $56,000 in 2019 ($55k in 2018)
|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|
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.
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.
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.
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.