Definition
A retirement account for the self-employed and small business owners allowing contributions of up to 25% of net self-employment earnings, with a far higher dollar ceiling than a regular IRA.
Why it matters
It gives freelancers the big tax-deferred space employees get from a 401(k), with almost no paperwork. Contributions can change year to year, which fits irregular income.
Example
A designer with $100,000 of net self-employment earnings can put roughly $18,500 into a SEP IRA for the year and deduct all of it, versus the $7,000 regular IRA cap.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.