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Self-Directed SEP IRA Contributions to Increase by $1,000 in 2014

Starting on January 1, 2014, the Internal Revenue Services (“IRS”) announced that the maximum one can contribute to a self-directed SEP IRA cannot exceed the lesser of: (1) 25% of compensation, or (2) $52,000 for 2014. The maximum 2014 self-directed IRA contribution of $52,000 is an increase of $1,000 from 2013.

Notwithstanding the increase of $1,000 to the self-directed IRA contribution limit, the solo 401(k) Plan continue to be a better tax and retirement plan option for the self-employed. Like the self-directed SEP IRA, the solo 401(k) Plan contribution limits also increased by $1,000 in 2014.

Under the 2014 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $17,500 to an IRA Financial Group solo 401(k) Plan. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $52,000, an increase of $1,000 from 2013.

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $23,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $57,500, an increase of $1,000 from 2013.

To learn more about the self-directed SEP IRA and solo 401(k) plan, please contact a tax specialist at 800-472-0646.

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Posted in Solo 401(k)