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What is a SEP IRA?

A SEP (Simplified Employee Pension) IRA is a written arrangement that allows small business owners to make deductible contributions for their own and their employees’ benefit to a Traditional IRA.

A SEP-IRA is owned and controlled by the employee, and the employer makes contributions to the financial institution where the SEP-IRA is maintained.

The maximum deduction amount that a business can take for putting money into its employees’ SEP IRA is 25% of its employees’ wages or the amount that the business contributed, whichever is less.


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