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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 and $57,000 in 2020. Contributions to a SEP are tax-deductible, and earnings within the account are tax-free until withdrawn.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 and $285,000 for 2020).
SEP IRA Pros and Cons
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:
Be at least 21 years of age;
Have worked for the business during any three of the past five years; and
Have earned the $600 annual minimum required compensation.
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.
2019-2020 Contribution Limits
IRA Contribution Limits, Catch Up Provisions and Contribution Deadlines
2020 IRA Contributions & Deductions Infographic
Infographic summarizing IRS contribution limits and catch up provisions for retirement accounts
Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional. Equity Institutional services institutional clients of Equity Trust Company. Brokerage Services Available Through ETC Brokerage Services, Member SIPC, and FINRA. *Founded in 1974 | Self-Directed IRA Custodian since 1983. The predecessor business to Equity Trust Company was established in 1974 and the IRS approved as a custodian in 1983. **Assets under custody as of 3/1/2020.
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