SEP IRA Contribution Limits & Deadlines For 2024 & 2025

A SEP IRA (Simplified Employee Pension) can be a useful retirement savings tool for small business owners and self-employed professionals looking to contribute more than they could with a traditional or Roth IRA.

While it’s a powerful savings tool, SEP IRAs follow different  rules than other IRAs. Understanding contribution limits, deadlines, and eligibility rules can help you make the most of it. Let’s break it all down so you know exactly how much you can contribute and when.

What Is a SEP IRA?

A SEP IRA (Simplified Employee Pension) is a tax-deferred retirement plan designed for self-employed individuals, freelancers, and small business owners. It allows for employer-only contributions and is relatively easy to set up and manage. 

SEP IRA Contribution Limit

A SEP IRA allows employers to contribute significantly more than a traditional IRA — up to 25% of compensation, capped at $69,000 for 2024 and $70,000 for 2025. That’s over 10 times higher than the Traditional IRA limit of $7,000 (or $8,000 if age 50 or older) for both years.

Contributions are made with pre-tax dollars and are generally tax-deductible for the business. Investments in your account have the potential to grow tax-deferred until you withdraw funds in retirement.

SEP IRA Contribution Deadline

📝 Reminder: The extension gives you more time to contribute, but taxes owed are still due by the original filing deadline.

How Contributions Are Calculated

Only employers can contribute to a SEP IRA; employees cannot contribute on their own. If you’re contributing to your own SEP IRA as a business owner, you must contribute the same percentage of compensation to each eligible employee’s accounts.

✏️ Example: If you contribute 15% of your compensation, you must also contribute 15% of each eligible employee’s compensation to their SEP IRAs.

Contribution Rules:

✅ Employers can contribute up to 25% of compensation to their own SEP IRAs and to accounts  of all eligible employees, subject to annual limits.

✅ Employees qualify if they are 21 years old or older, have worked for you at least 3 of the last 5 years, and earned at least $750 during the year (2024 and 2025 limits).

✅ All employer contributions are immediately 100% vested, meaning employees fully own and control the funds outright once deposited.

Contributions Are Not Required Every Year

One advantage of a SEP IRA is its flexibility.  You’re not required to contribute annually and can adjust based on your business performance. In a strong year, you can contribute up to 25% of your compensation (within the annual limit). In slower years, you can contribute 0% without any penalties.

SEP IRA limitations:

❌ No Roth Option: SEP IRAs only allow pre-tax contributions. While this may reduce taxable income today, withdrawals in retirement are taxed as ordinary income. If you’re looking for Roth contributions or broader investment flexibility, consider a Roth IRA or Solo 401k instead. 

❌ No Catch-Up Contributions: A SEP IRAs do not allow extra contributions for individuals age 50 or older. Traditional and Roth IRAs offer an additional $1,000, while a Solo 401k allows an extra $7,500. If you’re at least 50 years old, your Solo 401k limit is $76,500 for 2024 and $77,500 for 2025.

Wrapping It Up

A SEP IRA is generally a strong option for self-employed individuals or business owners  looking for high contribution limits and simple setup. But keep in mind its two limitations:

❌ No Roth contribution option

❌ No catch-up contributions

If you’re self-employed with no employees, a Solo 401k may offer more flexibility— including Roth contributions, catch-up contributions, and broader strategy support. 

As always, take time to compare your options carefully, review the latest IRS rules, and choose the plan that aligns with your income and long-term financial goals.