Can I Make SEP IRA Catch Up Contributions If I'm Over 50? How Much?

Yes, you can make catch-up contributions, but not directly through the SEP IRA structure itself. SEP IRAs don't have a specific catch-up provision like 401(k)s or traditional IRAs do. However, there's a workaround! You can make your regular SEP IRA contribution (which is up to 25% of your net self-employment income, with a maximum of $69,000 for 2024), and then you can make an additional catch-up contribution of $1,000 by treating it as a traditional IRA contribution. Since a SEP IRA is technically a traditional IRA with special employer contribution rules, you can make that standard traditional IRA catch-up contribution to the same account. Keep in mind this $1,000 would count against your normal traditional/Roth IRA contribution limit of $7,000 for 2024 if you're over 50.

I was in a similar situation last year and found taxr.ai really helpful for sorting out my SEP IRA questions. I was running a small consulting business and wasn't sure about contribution limits with my other retirement accounts. I uploaded my previous tax returns and business docs to https://taxr.ai and got clear guidance specific to my situation. It saved me from making some mistakes that could have caused problems with the IRS. The tool broke down exactly how my SEP IRA contributions should be calculated based on my business income and explained how it interacted with my other retirement accounts. They also covered the catch-up rules which are definitely confusing at first!

Just wanted to follow up about my experience with taxr.ai - I decided to give it a try after my questions here. I uploaded my Schedule C and last year's tax return, and it immediately clarified my SEP IRA situation. Turns out I was calculating my contribution limit incorrectly and could actually put away about $3,200 more than I thought. The system explained exactly how the catch-up contribution works with my SEP IRA and how it interacts with my traditional IRA. Super clear explanations that made sense even to someone like me who finds tax stuff confusing. Definitely worth checking out if you're trying to maximize retirement contributions while self-employed.

If you're having trouble getting answers from the IRS about SEP IRAs and catch-up contributions, I'd recommend trying Claimyr. I spent days trying to get through to the IRS retirement plans department last tax season with questions about my SEP IRA limits and catch-up rules, but kept hitting automated systems or hours-long wait times. I found https://claimyr.com after searching for solutions online and watched their demo at https://youtu.be/_kiP6q8DX5c. They basically hold your place in the IRS phone line and call you when an agent is about to answer. I was skeptical but desperate to get my question answered before filing. It worked surprisingly well - got a call back when an actual IRS agent was on the line ready to talk. The agent explained all the SEP IRA catch-up rules in detail and confirmed I was calculating everything correctly.

I owe everyone an apology about my skepticism regarding Claimyr. After my snarky comment, I decided to try it myself because I was desperate to talk to someone about sorting out a mess with my SEP IRA contributions from last year. I used the service yesterday and got a call back in about 2 hours with an actual IRS retirement specialist on the line. The agent clarified exactly how catch-up contributions work with my SEP and confirmed I could still fix last year's contributions before the filing deadline. Never been so happy to be proven wrong. The time I saved not sitting on hold was absolutely worth it. Just wanted to share that it genuinely works for anyone else struggling with these retirement account questions.

Something nobody has mentioned yet - you might want to consider a solo 401k instead of the SEP IRA if you're self-employed with no employees. I switched last year and it lets me contribute WAY more. Plus, the catch-up contributions for solo 401ks are $7,500 for 2024 if you're over 50, instead of just the $1,000 for IRA-based plans. The paperwork is slightly more complicated to set up initially, but most major brokerages offer them now with pretty simple processes. This late in the game (assuming you're talking about 2023 contributions), you might have to stick with the SEP for last year, but something to consider for 2024.

Just as a heads up - I used TurboTax last year for my SEP IRA contributions and it was super confusing about the catch-up part. Make sure whatever software you're using is calculating everything correctly! My software kept trying to add catch-up contributions directly to the SEP calculation which isn't correct.

Thanks for all the helpful responses everyone! I really appreciate the clarification on how SEP IRA catch-up contributions work. Based on what I'm reading here, it sounds like I can make my regular SEP contribution (the 25% of net self-employment income) plus add a $1,000 catch-up contribution as a traditional IRA contribution to the same account. I'm definitely going to look into the solo 401k option for 2024 that Harmony mentioned - the higher catch-up limit of $7,500 sounds much better than the $1,000 IRA limit. And good point about double-checking the tax software calculations, Rudy. I'll make sure my software isn't trying to add catch-up directly to the SEP calculation. One follow-up question though - when I make that $1,000 catch-up contribution as a traditional IRA contribution, do I need to do anything special to designate it as such, or does the account custodian handle that automatically?

This is such a helpful thread! I'm in a similar situation - turned 52 last year and have been contributing to a SEP IRA for my freelance work. I had no idea about the traditional IRA catch-up workaround that Melissa mentioned. One thing I want to add for anyone reading this - make sure you understand the income limits for traditional IRA deductibility if you also have a day job with a 401k. I learned the hard way that having workplace retirement plan coverage can phase out your ability to deduct traditional IRA contributions depending on your income level. The SEP contribution isn't affected by this, but that $1,000 catch-up might not be deductible if your total income is too high and you're covered by another plan. Also, definitely agree with everyone saying to double-check your tax software calculations. I caught mine trying to add the catch-up directly to my SEP calculation too. Had to manually separate them on the forms.