2024 SEP IRA Contribution Limit
For 2024, the SEP IRA Contribution Limit figures are $69,000 (Defined contribution limit), $750 (Compensation threshold), 25% (Share of employee compensation) and 20% (Share of net earnings, self-employed).
Effective 2024-01-01Source: Notice 2023-75 (IRS)Verified 2026-09-03
Share of employee compensation, Share of net earnings, self-employedSource: Publication 560 (2024), Retirement Plans for Small Business (IRS)Verified 2026-09-03
Compared with 2023
| Item | 2023 | 2024 | Change |
|---|---|---|---|
| Defined contribution limit | $66,000 | $69,000 | +$3,000 (+4.5%) |
| Compensation threshold | $750 | $750 | +$0 (+0.0%) |
| Share of employee compensation | 25% | 25% | +0% (+0.0%) |
| Share of net earnings, self-employed | 20% | 20% | +0% (+0.0%) |
Who it applies to
Employers and self-employed individuals who maintain Simplified Employee Pension (SEP) IRAs, and employees who participate in SEPs.
What changed this year, and why
For 2024, the defined contribution plan limit under IRC Section 415(c)(1)(A) increased to $69,000, effective January 1, 2024, up from the previous year's limit. This cap applies to total contributions to a SEP IRA. The minimum compensation an employee must earn to be eligible for a SEP under IRC Section 408(k)(2)(C) remains $750.
Common questions
- What is the maximum contribution to a SEP IRA for 2024?
- The total contributions to a SEP IRA for 2024 cannot exceed $69,000. This is the defined contribution plan limit under IRC Section 415(c)(1)(A), effective January 1, 2024.
- What is the minimum compensation required for an employee to participate in a SEP in 2024?
- An employee must have at least $750 in compensation to be eligible to participate in a SEP in 2024, under IRC Section 408(k)(2)(C). This amount did not change from prior years.
Every amount on this page is a published figure rather than yours. The SEP IRA contribution limit for employees takes the number you enter and works it out against them, showing which published figure it used.
The 25% of compensation ceiling
For 2024, the IRS caps how much an employer can contribute to a common-law employee's SEP IRA. The contribution cannot be more than 25% of that employee's compensation. Even if 25% of compensation is a large number, the contribution is still limited to a maximum dollar amount per participant. Employer contributions themselves are not counted as part of the employee's compensation when calculating this 25% limit. The same ceiling applies to contributions the employer makes to their own SEP IRA, though self-employed individuals must follow additional computation rules to determine their deductible amount. The plan document itself specifies how the employer contribution is calculated and allocated among participants.
Contributions you make for 2024 to a common-law em- ployee's SEP IRA can't exceed the lesser of 25% of the employee's compensation or $69,000. Compensation generally doesn't include your contributions to the SEP. The SEP plan document will specify how the employer contribution is determined and how it will be allocated to participants.
Publication 560 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
How much of the contribution you can deduct
For 2024, the IRS caps how much an employer can deduct for contributions to a participant's SEP IRA. The deductible amount cannot be more than 25% of the compensation paid to that participant during 2024 from the business that has the plan. Even if 25% of compensation calculates to a large number, the deduction is still limited to $69,000 per participant. The 25% is applied to compensation that is limited to $345,000 per participant, so the maximum deductible contribution is the lesser of 25% of $345,000 or $69,000. The deduction also cannot exceed the actual contributions made (including any excess contributions carried over from prior years). These limits apply to contributions for common-law employees. Self-employed individuals follow additional rules because their compensation is defined differently as net earnings from self-employment, which requires a special computation to determine the deductible amount.
The most you can deduct for your contributions to your or your employee's SEP IRA is the lesser of the following amounts. 1. Your contributions (including any excess contributions carryover). 2. 25% of the compensation (limited to $345,000 per participant) paid to the participants during 2024, from the business that has the plan, not to exceed $69,000 per participant.
Publication 560 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
For a self-employed person, compensation is net earnings
For self-employed individuals, the IRS requires a special computation to determine the maximum deductible contribution to their own SEP IRA. When figuring the deduction, compensation is defined as net earnings from self-employment, which takes into account two specific deductions: the deduction for the deductible part of self-employment tax, and the deduction for contributions to the SEP IRA itself. Because the contribution deduction and net earnings depend on each other, the calculation cannot be done directly. Instead, the self-employed person must use either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed from chapter 5 of Publication 560, depending on the plan's contribution rate. Then, the maximum deduction is figured using the Deduction Worksheet for Self-Employed, also in chapter 5. This special computation ensures the contribution is properly calculated on the reduced net earnings figure after accounting for both the self-employment tax deduction and the contribution itself.
If you contribute to your own SEP IRA, you must make a special computation to figure your maximum deduction for these contributions. When figuring the deduction for con- tributions made to your own SEP IRA, compensation is your net earnings from self-employment (defined in chap- ter 1), which takes into account both the following deduc- tions. • The deduction for the deductible part of your self-em- ployment tax. • The deduction for contributions to your own SEP IRA.
Publication 560 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
A self-employed person uses a reduced contribution rate
For self-employed individuals, the deduction for contributions to their own SEP IRA and their net earnings depend on each other, creating a circular calculation. Because of this interdependence, the IRS requires that the deduction be determined indirectly by reducing the contribution rate called for in the plan. To do this, the self-employed person must use either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed from chapter 5 of Publication 560, whichever is appropriate for the plan's contribution rate. After reducing the rate, the maximum deduction is then figured using the Deduction Worksheet for Self-Employed, also found in chapter 5. This indirect method ensures the contribution is properly calculated on net earnings that have already been reduced by both the self-employment tax deduction and the contribution deduction itself, avoiding the circular reference problem.
The deduction for contributions to your own SEP IRA and your net earnings depend on each other. For this rea- son, you determine the deduction for contributions to your own SEP IRA indirectly by reducing the contribution rate called for in your plan.
Publication 560 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
Who must be included, and who can be left out
Under IRS rules for 2024, a SEP IRA must be established for each employee who meets all three eligibility requirements: the employee has reached age 21, has worked for the employer in at least 3 of the last 5 years, and has received at least $750 in compensation from that employer during 2024. Employers may use less restrictive eligibility rules if they choose, but they cannot impose more restrictive ones. Certain employees may be excluded from coverage, including those covered by a union agreement. Once an employee meets the eligibility criteria, the employer must set up a SEP IRA for that individual and make contributions on their behalf. The $750 compensation threshold remains the same for 2025.
Eligible employee. An eligible employee is an individual who meets all the following requirements. • Has reached age 21. • Has worked for you in at least 3 of the last 5 years. • Has received at least $750 in compensation from you in 2024.
Publication 560 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
A SEP for last year can still be opened this spring
Employers have flexibility when it comes to establishing a SEP IRA for a given tax year. You don't need to set up the plan by December 31st of that year. Instead, you can establish a SEP for any year as late as the due date of your income tax return for that year, including any extensions you've filed. This means if you file for an extension on your 2024 tax return, you have until that extended deadline to open a SEP for 2024 and still make contributions that count for that tax year. This flexibility gives business owners additional time to decide whether to establish a plan and to arrange their finances accordingly, while still being able to claim the tax benefits for the prior year.
Deadline for setting up a SEP. You can set up a SEP for any year as late as the due date (including extensions) of your income tax return for that year.
Publication 560 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
A contribution too big to deduct this year carries into next year
When an employer contributes more to a SEP than they can deduct in a given tax year, the excess doesn't simply disappear. The IRS allows you to carry over the nondeductible portion and deduct it in later years, combining it with your contributions for those subsequent years. However, your combined deduction in any later year is still subject to the deduction limit for that year, which is 25% of participating employees' compensation. For SEP purposes, the plan is treated as a profit-sharing defined contribution plan when calculating this limit. This means if you exceed the deduction limit in 2024, you can spread those excess contributions forward and claim them in future years, but each year's total deduction remains capped at the percentage limit. Self-employed individuals need to apply additional reductions to figure their maximum deduction for contributions made for themselves.
If you contribute more to a plan than you can deduct for the year, you can carry over and deduct the difference in later years, combined with your contributions for those years. Your combined deduction in a later year is limited to 25% of the participating employees' compensation for that year. For purposes of this limit, a SEP is treated as a profit-sharing (defined contribution) plan.
Publication 560 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
Contributing more than the deduction limit costs a 10% excise tax
Contributing more to a SEP than you can deduct creates more than just a deferred deduction problem. If you make nondeductible excess contributions to a SEP, you may be subject to a 10% excise tax on those excess amounts. This tax penalty is imposed in addition to the fact that you cannot claim the deduction for the excess contribution in the current year. The IRS treats these excess contributions as a violation of the deduction limits, and the excise tax serves as a penalty for exceeding them. To avoid this tax, employers need to ensure their contributions stay within the allowable deduction limits for the year. If excess contributions do occur, the carryover provisions allow you to deduct them in future years when you have deduction capacity available, but the excise tax may still apply in the year the excess was made.
Excise tax. If you made nondeductible (excess) contribu- tions to a SEP, you may be subject to a 10% excise tax.
Publication 560 (2024), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Notice 2023-75 (IRS)
- Defined contribution limit
The limitation for defined contribution plans under section 415(c)(1)(A) is increased in 2024 from $66,000 to $69,000.
- Compensation threshold
The compensation amount under section 408(k)(2)(C) regarding simplified employee pensions remains $750.
Publication 560 (2024), Retirement Plans for Small Business (IRS)
Contributions you make for 2024 to a common-law em- ployee's SEP IRA can't exceed the lesser of 25% of the employee's compensation or $69,000.
The deduction for annual employer contributions (other than elective deferrals) to a SEP plan, a profit-sharing plan, or a money purchase pension plan can't be more than 20% of your net earnings (figured without deducting contributions for yourself) from the business that has the plan.