<P> SEP - IRA funds are taxed at ordinary income tax rates when qualified withdrawals are taken after age 59 1 / 2 (as for traditional IRAs). Contributions to a SEP plan are deductible, lowering a taxpayer's income tax liability in the contribution year . </P> <P> SEP - IRA contributions are treated as part of a profit - sharing plan . For employees, the employer may contribute up to 25% of the employee's wages to the employee's SEP - IRA account . For example, if an employee earns $40,000 in wages, the employer could contribute up to $10,000 to the SEP - IRA account . </P> <P> The total contribution to a SEP - IRA account should not exceed the lesser of 25% of income (20% for self - employed before self - employed tax deduction is included); (see below) or $42,000 (for 2005), $44,000 (2006), $45,000 (2007), $46,000 (2008), $49,000 (2009 - 2011), $50,000 (2012), $51,000 (2013), $52,000 (2014), $53,000 (2015 & 2016), and $54,000 (2017). For 2010 and 2011, the compensation used in the calculation was capped at $245,000 (e.g., an employer making a 10% contribution cannot contribute more than $24,500 for any employee). </P> <P> The contribution limit for self - employed persons is more complicated; barring limits, it is 18.587045% (approximately 18.6%) of net profit . The computation is in IRS Pub 560, section 5, Table and Worksheets for the Self - Employed, specifically Deduction Worksheet for Self - Employed . </P>

What are the contribution limits for a sep ira
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