How the SEP IRA Calculator Works
A SEP IRA lets self-employed individuals and small business owners make substantial, tax-deductible retirement contributions — often far more than a traditional or Roth IRA allows.
This SEP IRA calculator computes:
- Maximum SEP IRA Contribution — the lesser of your percentage-based amount or the IRS dollar limit
- Effective Contribution Rate — your contribution as a percentage of compensation
- Estimated Tax Savings — the potential reduction in taxes owed
- Compensation Remaining — what’s left after the contribution
SEP IRA Contribution Formula
Max Contribution = MIN(Compensation × Contribution %, IRS Annual Limit)
Estimated Tax Savings = Max Contribution × Marginal Tax Rate
SEP IRA Examples
Example 1: Self-Employed Consultant
| Variable | Value |
|---|---|
| Annual Compensation | $120,000 |
| Contribution Percentage | 20% |
| Max Contribution | $24,000 |
| Est. Tax Savings (24%) | $5,760 |
Example 2: Higher-Income Business Owner
| Variable | Value |
|---|---|
| Annual Compensation | $300,000 |
| Contribution Percentage | 25% |
| IRS Annual Limit | $70,000 |
| Max Contribution | $70,000 (capped by IRS limit) |
Who Benefits from the SEP IRA Calculator?
This SEP IRA contribution calculator is designed for:
- Self-employed individuals maximizing tax-advantaged retirement savings
- Small business owners planning contributions for themselves and employees
- Freelancers with variable income estimating annual contribution room
- Financial planners modeling client retirement strategies
Frequently Asked Questions
What is a SEP IRA?
A SEP IRA (Simplified Employee Pension) is a retirement plan that allows self-employed individuals and small business owners to make tax-deductible contributions to their own and their employees’ retirement accounts.
How much can I contribute to a SEP IRA?
SEP IRA contributions are generally limited to the lesser of 25% of compensation or the IRS annual dollar limit, which is adjusted periodically for inflation.
Are SEP IRA contributions tax-deductible?
Yes. SEP IRA contributions are generally tax-deductible as a business expense or above-the-line deduction, reducing your taxable income for the year.
Can employees contribute to their own SEP IRA?
No. Only the employer (including a self-employed individual for themselves) makes SEP IRA contributions; employees cannot make their own salary-deferral contributions to a SEP IRA.
Is my data stored anywhere?
No. All calculations run locally in your browser. No data is sent to any server.
IRS contribution limits are adjusted periodically for inflation. Please verify the current limit before relying on these results for tax filing purposes.