SEP IRA Contribution Limits & Eligibility: A Comprehensive Guide

SEP IRA contribution limits are the main reason that the SEP IRA is so popular. The SEP IRA is designed to aid those that are self-employed or owners of small businesses. Here are the basics of the SEP IRA and the contribution limits for the account.

SEP IRA Eligibility

In order to determine whether you can contribute to a SEP IRA, you need to figure out if you are eligible first. In order to open a SEP IRA, you have to be a sole proprietor, in a partnership, or be the owner of a business. If you make any self-employment income, even if you work for someone else as well, you can contribute to a SEP IRA.

Contribution Limits

When you have a SEP IRA, you have a yearly maximum contribution that you have to adhere to. You can contribute up to 25% of your yearly income into the SEP IRA. The maximum dollar amount that you have to stay under is $49,000. This contribution limit is very attractive to many self-employed people because it is much higher than any other type of retirement account that you could utilize. A traditional IRA, by comparison, only allows you to contribute a maximum of $5000 per year.