Last week we started our tax season discussions here (- the HSA) with a favorite “Last Year” tax savings ideas that can be done this year …
This week another super saving idea … Think of this as an IRA on steroids – due to high limits and ample flexibility!
The SEP – Simplified Employee Pension
Here are just a few reasons why we love the SEP for the correct situation:
- Offset 1099 or other consulting like – non W-2 income in a pre-tax form
- An IRA can be used to accept a SEP contribution in many cases – no new account needed
- Can be used in conjunction with a 401k – Only need 1099 income – High Contribution limits apply
- High Maximum Deferral amount $54k – yes that is correct FIFTY FOUR THOUSAND of pre-tax dollars as long as that is no more than 25% of Adjusted Gross Income
- Can make SEP contributions even after RMD (Required Minimum Distributions) Begin
- Can make your contribution even after the regular tax deadline if you file an extension – This really makes a SEP valuable and give us plenty of time to make the contribution again for LAST year’s tax savings
There are certain limitation and restrictions as mentioned, so don’t just make a contribution unless you are sure it will work for you … or just reach out to us!
Have a Great “SEP” Tax Savings Day!
John A. Kvale CFA, CFP