Designed for self-employed individuals and small business owners (typically with up to 25 employees), the SEP IRA allows an annual contribution of up to $56,000 in 2019. Contributions to a SEP are tax deductible, and earnings within the account are tax-free until withdrawn.
An employer may contribute up to 25% of each employee’s annual compensation (the maximum considered compensation is $280,000 for 2019).
Any employer—whether a corporation, partnership, or self-employed individual—may establish the plan, even if there is only one employee.
Employees must meet ALL of the following requirements:
Spouses and children may also participate in the plan and open their own SEP IRAs—as long as they are employees of the company and meet the income requirements.