The Benefits of a SEP IRA

Are you self-employed and in need of a tax deduction? A Simplified Employee Pension (SEP) IRA may be the perfect Self-Directed IRA for you to start! The SEP IRA is an incredibly popular IRA to establish, especially around tax time. Many CPA’s will instruct their clients to establish a SEP IRA just so that the contribution to the plan can be used as a write off, which helps to lower the client’s overall tax burden.

The SEP offers a significantly higher contribution limit than the individual plans like the Traditional and Roth. In fact, if you are self-employed you can contribution 0-25% of your compensation, up to a maximum of $53,000 per year. And that is a tax write off for you! The only requirement is that the contribution percentage you choose, in any given year, must be the same for any employee of the business. Just like any other Self-Directed IRA the SEP can hold “alternative” assets such as real estate, tax-liens, private company stock, etc.

A SEP IRA can be funded with annual contributions, rollovers from employer sponsored plans such as 401k’s, or via transfers from other tax-deferred IRAs. Contributions to the plan can be made up until the tax filing deadline for the company, including extensions, thus SEP contributions are often received for the previous tax year as late as October 15th. This gives you flexibility as you can still contribute to a SEP well after the typical deadline of April 15th for the individual Traditional and Roth IRAs. If you’d like to discuss the establishment of a Self-Directed SEP IRA give one of our Self-Directed IRA Specialists a call today!

By Matthew A Tillack