SEP IRA contribution limits are set at $52,000 for 2015 and $53,000 for 2014. We explain additional limits and restrictions below, including SEP IRA contribution limits for the self employed. We also cover SEP IRA contribution limits on amounts employees can contribute to their own employer-based plans.
- Traditional IRA Contribution Limits
- Roth IRA Contribution Limits
- SIMPLE IRA Contribution Limits
- SEP IRA Contribution Limits
- Traditional 401k Contribution Limits
- Roth 401k Contribution Limits
- One-Participant 401k Contribution Limits
- Coverdell ESA Contribution Limits
- HSA Contribution Limits
SEP IRA Contribution Limits
The table below shows the SEP IRA contribution limits for 2014 and 2015.
SEP IRA contribution limits for 2014 are the lesser of $52,000 or 25% of the employee’s compensation. For 2015 the limit is $53,000 or 25%.
For example, someone who makes $100,000 per year can only have their employer deposit 25% of their pay into their SEP IRA, or $25,000.
SEP stands for Simplified Employee Pension. SEP IRAs give business owners an easier way to build retirement savings for themselves and their employees.
SEP IRAs are like traditional IRAs in that contributions to them are tax free but withdrawals in later years are taxed as income. SEP IRAs are a great way for employers to compensate their employees tax free, putting money straight into a retirement account that can be invested and earn interest. Self-employed people can also use SEP IRAs.
SEP IRA contribution limits are a lot higher than contribution limits on Roth IRAs, traditional IRAs or SIMPLE IRAs.
Self employed people face far more complicated SEP IRA contribution limits. The limits for self employed people are generally around 18.6% of net profit for the business. Self employed people who want to contribute to an SEP IRA and need to figure their contribution limit will usually want to hire a CPA.
Self employed people who’d rather go it alone should refer to the worksheets on IRS Publication 560 to figure their SEP IRA contribution limits.
The contribution limit for the self employed is net profit minus half the self employment tax minus the SEP contribution. The circular math is what makes this calculation so difficult and what makes hiring an accountant a good idea. (The math is circular because taxpayers need to know their contribution amount to figure their contribution limit.)
Employees can contribute to their own SEP IRAs. However, employee contributions to SEP IRAs affect the employee’s Roth and traditional IRA limits for the year.
For example, let’s say the boss of a 45 year old woman contributes $20,000 to her SEP IRA in 2015. Suppose the woman also contributes $5,000 to the same SEP IRA. If she has a traditional IRA in her name, she can now only contribute $500 to it, since the traditional IRA contribution limit for 2015 is $5,500.
- Employers have to contribute the same percentage to all employee SEP IRAs.
- SEP IRA contributions for any year can be made up until April 15th of the following year.
- Employees with SEP IRA plans can also contribute to Roth IRAs and traditional IRAs. Roth IRA and traditional IRA contribution limits stay the same regardless of how much an employer puts into an employee’s SEP IRA.
- Employers don’t have to contribute to SEP IRAs every year.
- In years when employers contribute to SEP IRAs, they have to contribute to every employee’s account, even if the employee is over age 70 1/2.