How Do You Determine A Maximum SEP IRA Contribution?
Being your own boss has many advantages. Along with the additional responsibility comes the need to take care of your own retirement contributions. The Simplified Employee Pension (SEP) IRA is designed for small business owners. There’s little red tape and paperwork involved, and it works best for those who have very few or no employees at all. Remember that contributions are fully deductible on the small business owner’s taxes. Contributions also have the potential to grow tax-deferred, which is great news for those looking for a comfy retirement. Determine the maximum contribution allowed by knowing your status. Employees involved in a SEP IRA can contribute up to 25 percent of their wages. Owners and self-employed participants who take net profits from their company can contribute up to 20 percent of their net profits, rather than income. Calculate net profits. Take net self-employment income and subtract half of self-employment taxes. This equals “net” self-employment income and mu
