SEP IRA Contribution Limits

The 2017 SEP IRA contribution limit is $54,000 and the 2018 SEP IRA contribution limit is $55,000.

S or C corporation or an LLC taxed as a corporation.

For incorporated businesses, compensation is based on W-2 income. Annual contributions can be made into a SEP IRA up to 25% of W-2 income.

Sole proprietorship, partnership or an LLC taxed as a sole proprietorship

For those taxed as sole proprietors compensation is based on adjusted earned income. Adjusted earned income is determined by completing an IRS worksheet. SEP IRA contributions of 20% of adjusted earned income can be made annually. In 2017 annual compensation of more than $270,000 cannot be taken into consideration for determining contributions. In 2018 the compensation limit increases to $275,000.

Contributions to a SEP IRA are generally 100% tax deductible and investment earnings in a SEP IRA grow taxed deferred. Withdrawals after age 59 ½ are taxed as ordinary income. Withdrawals prior to age 59 ½ may incur a 10% IRS penalty as well as income taxes.

A SEP IRA has broad appeal due to its high annual contribution limits, completely discretionary and flexible annual contributions and minimal administration. SEP IRA plans can be established by a one person business or by a business owner with employees.

Most frequently a SEP IRA is established by a business owner with no employees, however, in special situations it may be an ideal retirement plan for a business owner with employees.

SEP IRA Calculator

To determine how much you can contribute to a SEP IRA based on your income use the interactive SEP IRA calculator.


Beacon Capital Management Advisors provides retirement plans to the self employed, freelancers, entrepreneurs, independent contractors and small business owners and is registered in all 50 States.