Investing Retirement Planning IRAs SEP-IRA Contribution Limits and Deadlines Learn the latest contribution limits and deadlines for SEP-IRAs By Scott Spann Scott Spann Facebook Twitter Website Scott Spann is an investing and retirement expert for The Balance. He is a certified financial planner with over two decades experience. Scott currently is senior director of financial education at BrightPlan. Scott is also a published author and an adjunct professor at Maryville University, where he teaches personal finance. learn about our editorial policies Updated on May 5, 2022 Reviewed by Ebony J. Howard Reviewed by Ebony J. Howard Ebony Howard is a certified public accountant and a QuickBooks ProAdvisor tax expert. 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Her stint as a legal assistant at a law firm equipped her to track down legal, policy and financial information. learn about our editorial policies Share Tweet Pin Email In This Article View All In This Article The Basics of SEP-IRAs SEP-IRA Contribution Limits Your Net Adjusted Self-Employment Income Contribution Deadlines Keep SEP-IRA Limits in Context Frequently Asked Questions (FAQs) Photo: vgajic / Getty Images The Simplified Employee Pension IRA (SEP-IRA) provides a great way for self-employed people to save money for retirement. But you have to know the contribution limits and you must stay within them. You also have to meet certain deadlines. The Basics of SEP-IRAs SEP plans provide business owners with a way to save for retirement for themselves and for their workers. Self-employed people and businesses of any size can set up this type of plan. Owners can invest money for each employee. It's a fairly simple account that you can manage with just a little paperwork. There are no annual filing rules. SEP-IRAs allow you to make tax-deductible contributions and grow your earnings on a tax-deferred basis. Neither the money you put in nor its gains will be taxed until you withdraw it. SEP-IRAs also offer funding flexibility from one year to the next, which can be a real win for businesses with fluctuating fortunes. Note You can invest up to the SEP-IRA limits if your business is having a stellar year, or you can choose not to put in any money at all if it's a tight year. Assets held in SEP-IRAs are treated as traditional IRA assets by law. They're subject to many of the same rules as these IRAs as a result. SEP-IRA Contribution Limits One of the nicest features of the SEP plan is the large amount you can put away for retirement. All SEP-IRA contributions are considered to be made by employers on behalf of their workers. You can contribute up to 25% of employee compensation, or $61,000 in 2022, whichever is less. This is up from $58,000 in 2021. You have to contribute the same percentage of compensation for all of your workers if you're doing so on behalf of others. Your own compensation would be your adjusted self-employment income for the year if you're paying into your own SEP plan. Note The annual limit is subject to annual cost-of-living adjustments. The high limit may allow you to put away more money in a SEP-IRA than you could in other types of plans. These limits are greater than what they are for a traditional IRA limit: $6,000 in 2021 and 2022, or $7,000 for people age 50 or older. The 401(k) limit for workers is $20,500 in tax year 2022, up from $19,500 in 2021, or $27,000 for those age 50 or older. SEP-IRAs don't offer any catch-up provisions after age 49 as IRAs and 401(k)s do, but their contribution limits are already high. Your Net Adjusted Self-Employment Income Self-employed persons must use their net adjusted self-employment income as their compensation when they're calculating their SEP-IRA contribution limit of 25%. First, determine your gross income. Now subtract your business expenses, including what you paid into your SEP-IRA. Now subtract half your self-employment tax. This is your net adjusted income. Vanguard provides a useful calculator to help you figure out your maximum contribution to a SEP-IRA, but you might want to consult with a tax professional if you have other questions about how much you can pay in. Note Workers can also make tax-deductible traditional IRA contributions to SEP-IRAs if the plan allows for this, but the ability to deduct these may be limited or eliminated because of your participation in the SEP plan. Contribution Deadlines Like traditional IRAs, SEP-IRAs provide last-minute tax savings to reduce your tax bill as a business owner, but you must meet certain deadlines. A SEP-IRA must be set up by your company’s tax-filing deadline, plus any extensions, for the tax year to which the qualifying contribution applies. The tax-filing deadline for many small business owners is April 15 in most years. Asking for an extension of time to file will push the date back to October 15. Asking for an extension doesn't give you extra time to pay the taxes that will be due on that return, however. Note The IRS announced in February 2021 that the deadline for 2020 IRA contributions was pushed back to June 15, 2021 for residents in Texas, Louisiana, and Oklahoma. This change was in response to the 2021 winter storms and the ensuing disaster declarations. It applies to tax payments as well. Similar SEP-IRA deadlines apply when you're contributing funds. SEP-IRA contributions can be made for the prior year up until the tax filing deadline. You can set up the account and pay into it until April 15 or October 15. Be sure to notify the IRA custodian to code the contribution for the prior year if that's your intention. Keep SEP-IRA Limits in Context There are other retirement plan options for small businesses and self-employed persons, such as SIMPLE IRAs, individual 401(k)s, Keoghs, or regular 401(k)s. It makes sense to compare these options and decide which one is right for your needs. Frequently Asked Questions (FAQs) Can part-time employees invest in a SEP-IRA? You're able to invest in a SEP-IRA as long as you're over the age of 21, have worked with the business for three of the past five years, and you earned at least $650 X with the business in the past year. Where do I report SEP-IRA contributions on Form 1040? You can report the contributions you make to your SEP-IRA on line 16 of Schedule 1 if you're self-employed. The total from Part II of Schedule 1 transfers to line 10 of your Form 1040. You must report contributions made as it relates to the tax year that the SEP is established under. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Internal Revenue Service. “Simplified Employee Pension Plan (SEP)." Internal Revenue Service. "SEP Plan FAQs." Internal Revenue Service. "SEP Contribution Limits (Including Grandfathered SARSEPS)." Internal Revenue Service. “Retirement Topics - IRA Contribution Limits.” Internal Revenue Service. "2022 Limitations Adjusted as Provided in Section 415(d), Etc." Pages 1, 2. Internal Revenue Service. “Self-Employed Individuals – Calculating Your Own Retirement-Plan Contribution and Deduction.” Internal Revenue Service. "Publication 509, Tax Calendars." Internal Revenue Service. "Instructions for Form 7004." Internal Revenue Service. "Victims of Texas Winter Storms Get Deadline Extensions and Other Tax Relief." Internal Revenue Service. "2022 Limitations Adjusted as Provided in Section 415(d), Etc.," Page 2. Internal Revenue Service. "Schedule 1 Additional Income and Adjustments to Income," Page 2.