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The SEP IRA has a limit on the annual compensation that is used for figuring retirement plan contributions. For 2023, that limit is $330,000, an increase from $305,000 in 2022.
However, your maximum contribution to the SEP IRA and the 401 (k) together is $66,000 in 2023 or $69,000 in 2024, including both employer and employee contributions.
SEP-IRA funds are taxed at ordinary income tax rates when qualified withdrawals are taken after age 59 1 2 (as for traditional IRAs). Contributions to a SEP plan are deductible, lowering a taxpayer's income tax liability in the contribution year.
The contribution limit for a SEP IRA for 2023 is 25% of your compensation or $66,000 — whichever is less.
SEP IRA – a provision that allows an employer (typically a small business or self-employed individual) to make retirement plan contributions into a Traditional IRA established in the employee's name, instead of to a pension fund in the company's name.
For defined contribution plans, such as a 401 (k), you can chip in an extra $7,500 in 2023 if you’re 50 or older. You can’t make catch-up contributions to a SEP IRA, but you can squirrel away ...
Scenario #1 – A self-employed accountant makes $50,000 per year from her accounting business. Her maximum contribution is 25% of her post-contribution income ($10,000, which would be the same as saying 20% of her gross income), regardless of whether she uses a SEP-IRA, Keogh plan, or SIMPLE 401 (k).
The contribution limit for a SEP IRA is the lesser of 25% of compensation (20% of net income for self-employed individuals) or $66,000 in 2023.
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