2015 Contribution Limits for SEP IRA

How Much Can You Put in a SEP IRA in 2015?

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Business owners, rejoice! The amount that you can put away in a SEP IRA is up in 2015. 

If you have a Simplified Employee Pension individual retirement account, you already know the benefits of saving for your own retirement. Contributions to a SEP IRA can be taken directly off the top of your taxable income, potentially lowering your income tax bill while padding your long-term retirement savings. The amount you can put into a SEP IRA each year is substantial, making these plans a great option for highly compensated business owners looking to maximize their tax-deferred savings. 

If you are looking for other tax year limits, find them quickly at:

2015 SEP IRA Contribution Maximums

The contribution limit for a SEP IRA each year is up to 25% of your total income or 20% of adjusted income, up to a maximum of $265,000 in income in 2015 (up from $260,000 in 2014). That means the limit jumps from $52,000 in 2014 to $53,000 in 2015.

If you are age 50 or older, you are going to have to look elsewhere for a catch-up contribution. SEP IRAs do not come with a catch-up option, but the limits are still substantial. The 401(k) contribution maximum in 2015 is $18,000 with a $6,000 catch-up contribution opportunity for those 50 or older. That's a total of $24,000, compared with the $53,000 maximum available in 2015 with the SEP IRA.

Basics of Saving in a SEP

If you do not have a SEP IRA yet, you should get to know the benefits of saving in a SEP IRA. Individuals can open and set up a SEP IRA easily through a brokerage firm like Fidelity, Vanguard, or T. Rowe Price, among others. You may even be able to open one at your local bank. These plans work very much like other retirement plan options. Contributions to the fund can be invested in any way you choose. You have a wide variety of mutual funds, target date funds, stocks, bonds, real estate, and other types of investments to choose from. Investments grow tax-deferred until they are withdrawn at retirement. Once you take the money out, you will owe federal, state and any local income taxes on the money, and if you take distributions from the account before the retirement age of 59 1/2, you will owe an additional 10 percent penalty fee for early withdrawal. 

2015 Taxes and SEP IRAs

Most importantly, a SEP IRA is a tax saver. If you are looking to reduce your business tax bill, you can open a SEP IRA at the last minute to get an eleventh-hour deduction. As long as you open the account and deposit the contribution before you file taxes by April 15, 2016 (or October 15, 2016, if you file for an extension), your deduction counts against 2015 taxes.

If you want to max out your contribution, you have to determine your net adjusted self-employment income. The IRS recommends taking your gross income, subtracting business expenses (which should include SEP IRA contributions), then subtracting half of your self-employment tax.

2015 SEP IRA Contributions for Employees

If your business has employees, SEPs get slightly more complicated. Employers are required to contribute the same salary percentage to a SEP IRA for all employees. That means if you want to contribute 10 percent of your income in 2015, your employees must do the same. If the idea of doing this doesn't appeal to you, compare SEP IRAs to other types of small-business retirement plans and find a plan that works for you. 

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.