2024 SEP IRA Contribution Limit
For 2024, the SEP IRA Contribution Limit is $69,000 (Defined contribution limit), $750 (Compensation threshold) and 25% (Share of employee compensation).
Effective 2024-01-01Source: Notice 2023-75 (IRS)Verified 2026-08-29
Share of employee compensationSource: Publication 560 (2024), Retirement Plans for Small Business (IRS)Verified 2026-08-29
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%) |
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 calculator 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)
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.