Benefits of a SEP IRA

• Tax savings: Contributions are tax-deductible, reducing taxable income.
• Flexible funding: Contribute between 0% and 25% of compensation each year (up to $70,000 in 2025).
• Employer-only contributions: You control how much to contribute annually.
• Broad investment options: Choose from mutual funds, ETFs, stocks, and bonds.

How it works

Who is eligible

• Sole proprietors, partners, or small-business owners (typically with few employees).
• Must earn self-employment income from a trade, service, or business.

Contributions

• Employer-funded only.
• Each eligible employee must receive the same percentage.
• Contribution cap: 25% of compensation, max $70,000 in 2025.

Withdrawals

• Early withdrawals before 59½: 10% penalty (exceptions: first-time home purchase, certain college expenses).
• Required minimum distributions start at age 73.

Deadlines

• Must be established and funded by the business tax filing deadline (plus extensions).

What are the tax implications of a SEP IRA?

• Employer contributions are tax deductible.
• Contributions and earnings grow tax-deferred and are not taxed until they are withdrawn.