How much of my net earnings can I put into a SEP-IRA each year?

A SEP-IRA lets you contribute up to 25% of an employee's compensation, but for a self-employed owner the effective rate is closer to 20% of your net self-employment earnings after subtracting the deductible half of self-employment tax. The dollar amount is also capped at the overall limit the IRS sets annually. There is no employee-deferral piece like a Solo 401(k) has, so a SEP is contribution-lighter at lower incomes but simpler to run. All contributions are employer money and tax-deductible. The IRS explains the computation in Publication 560. If you have eligible employees, you generally must contribute the same percentage for them, which is a key reason many one-person shops prefer a Solo 401(k).