SEP IRA Contribution Limits (2014)

A few years ago I set up an SEP IRA, a retirement account designed for self-employed individuals and owners of small businesses. Frankly, it’s one of the best kept secrets for the self-employed.

An SEP IRA works similar to a traditional IRA or 401(k). Contributions are generally 100% tax deductible, and investments grow tax deferred. Withdrawals are generally taxed as ordinary income, and early withdrawals from an SEP IRA before you are 59 1/2 may incur a 10% penalty.

[Check out our List of Online Discount Brokers To House Your IRA.]

The big question for me was what the contribution limits are for an SEP IRA. And specifically, do contributions to a 401(k) affect how much can be contributed to an SEP IRS? So here’s what I learned from my accountant.

If you’re considering a traditional or Roth IRA, check out our 2010 IRA Contribution and Deduction Limits charts.

The contribution limit is calculated differently, depending on whether you’re self-employed or earn wages through your incorporated business. If you’re self-employed, the limit is 20% of your income before your self-employed tax deduction is included. If you earn wages recorded on a W-2, your limit is 25% of your income.

Regardless of your situation, though, you’re limited to a total contribution of $52,000 for 2014. If you contribute to other defined contribution plans, or if an employer matches some or all of your 401(k) contributions, those contributions reduce your $52,000 limit.

In other words, when you have an SEP IRA as a business owner or self-employed person, your total, across-the-board contributions to tax-advantaged retirement plans cannot exceed $52,000 for 2014.

Each year, the maximum contribution limit raises based on the annual Cost of Living Adjustment. As you can see from the table below, it’s pretty common for the limit to rise by about $1,000 per year..

Now, if you plan to set up a SEP IRA, consult with an accountant or other tax specialist before making any decisions. While I believe the above contribution limits to be accurate, I am not a tax specialist.

Here’s a quick summary of the limits:

Maximum Total Contribution
Percentage of Income Limitation
(corporation/sole proprietor)
2013$51,00025% / 20%
2012$50,00025% / 20%
2011$49,00025% / 20%
2010$49,00025% / 20%
2009$49,00025% / 20%

I use Scottrade for my SEP IRA and the service and low fees have been great. I also like the fact that they have offices with real people who can answer inevitable questions that arise from time to time.

Published or Updated: July 30, 2014
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.


  1. Patrick says:

    I ended up going with a Solo 401k, which was the best for my situation at the time. The aspect of the Solo 401k that I like is that I can contribute for my wife, who no longer works a day job. So I have her on the payroll and her salary can be used to fund her 401k. So not only is she earning for retirement, but she is also still contributing toward social security and earning those credits.

    Another benefit of going with the Solo 401k is that you can contribute up to the $16,500 max, then contribute profit sharing to work toward your $49,000 limit. That allows some people to contribute more than they would otherwise be able to contribute with a SEP IRA because they can contribute the $16,500 baseline first, then contribute more. It’s a moot point though if your business is profitable enough to cover the $49k.

    That’s the great thing about self-employed retirement accounts – there are many options and you can usually find a plan that will meet your needs.

    • kk says:

      hi Patrick,

      I am in a situation that you described above. Can I please call you to discuss my case with you. I am a self employed and have a SEP-IRA currently. I need to know how to contribute maximum $49000/

  2. Charles Schubert says:

    I have found nothing on the web or at the IRS site that says whether a sole proprietor can contribute to both a SEP IRA and an individual IRA? I have an individual as a result of plan roll overs from traditional employment. I have continued to contribute to that but it seems with my consulting a SEP would be/have been smarter. Since I already did my 2009 Traditional can I also do a SEP?

    • DR says:

      Charles, let me first say that I am NOT a tax expert, so you’ll need to consult a tax professional. That said, I’m pretty sure you can contribute to both up to the maximum ($49k I think).

      • Nate says:

        An old post, I know, but this advice is not completely accurate (or at least not fully disclosed).

        A SEP participant is considered “covered by an employer sponsored plan” and will be reflected as such on his/her W-2. Depending upon filing status and modified AGI, IRA contributions may or may not be deductible. Although one could technically still make a contribution even if it’s not deductible, it is rare that you actually should, in that case. There are almost certainly better options that provide similar or better tax breaks (e.g. fixed annuities and Roth IRAs). As a rule of thumb, anyone that is seriously concerned about the $49k cap almost assuredly makes too much money to qualify for the IRA deduction.

        All that aside, IRA contributions are limited to $5,000 in 2010 plus a catch-up contribution for those older taxpayers that qualify. $49k is only the maximum for certain employer sponsored plans.



    • George Fellner says:

      I was in college at Georgetown with John Bongiovanni class of ’56. Are you related?

  4. With SEP IRA maximum contribution limits so high I can quickly build up a retirement nest egg.

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