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A SEP IRA is for self-employed Members or small business owners. Any business with at least one employee — or anyone receiving freelance income — can have a SEP IRA.

Employers, not employees, make tax-deductible contributions to a SEP IRA, and can decide each year whether and how much to contribute.

A SEP IRA doesn't come with many of the start-up and operating costs of most conventional employer-sponsored retirement plans. And a key advantage of a SEP IRA over a traditional IRA is its annual contribution limit is significantly higher.

How it works

  • Employers make contributions on behalf of eligible employees to their SEP IRAs.
  • Contributions can be made up to 25% of the employee's compensation for the year or $69,000, whichever is less.1
  • Employers are not committed to making contributions — decisions about whether to contribute and how much can change each year.
  • When an employer makes contributions, it receives a tax deduction.2
  • Employees who leave the company can transfer their balance to a traditional IRA or another SEP IRA, or roll over the balance to a qualified plan.

How to qualify

  • Be a sole proprietor, partnership or corporation with at least one employee.
  • Employees must be at least 21 years old, have worked for the employer for three of the previous five years, and received at least $750 in compensation during the current year.


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  1. For 2024, the amount is subject to annual cost-of-living adjustments. The IRS announces any increase.
  2. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.