SEP Tax Deduction
A Simplified Employee Pension (SEP) or SEP IRA is a retirement plan anyone with self employment income is eligible to establish. Similar to traditional IRA's, SEP's allow you to contribute a portion of your income to your retirement account without paying income tax on your contributions until you withdraw them (presumably when you retire). However, unlike a traditional IRA, the contribution and deduction limits for a SEP IRA is much higher, equal to the lesser of 25% of employee compensation or $55,000 (2020 limits). Further, you can deduct contributions to your own plan, and contributions to the plans of your employees, which can create significant tax savings for entrepreneurs.