A Real Estate Agents Secret Weapon for Tax Deductions and Retirement – SEP IRA

Being self employed, is hard. We have said it before, and you know it as much as anyone else, you wear all the hats in your business, are expected to be the master of each, and know everything. The benefit is you reap all the rewards, the downside is you suffer all the consequences. Tax time and retirement are a part of that. If you have spent your career hustling and making great money, but not setting aside for retirement it is you who suffers.

We want to put a secret weapon into your arsenal. Something that will help you plan for a future where one day you will stop working, and help you to pay less taxes. That secret weapon comes directly from the IRS, and is called the Simplified Employee Pension or SEP IRA.

The SEP IRA is a retirement plan that can be set up by the self employed individual, as an employer and employee of their own business, they can contribute up to 25% of their income, up to $54,000. That means $25,000 for someone who makes $100,000.

The value is:

  • $25,000 deducted from taxable income
  • $25,000 for retirement

This isn’t cash out the door, this is cash invested in your future. This SEP IRA can also be managed by a professional, you don’t have to put on your investment hat and learn a new skill, you can leverage an expert to manage it for you. Check out the chart on Motley Fool’s page for an idea of what $10,000 invested annually at 8% growth looks like.

Here are two links which have more detail about the SEP IRA:

Motley Fool


Below are some requirements to set up an SEP IRA, from Motley Fool:

  • Only the employer (or self-employed person) contributes to the account, and there are generally no filing requirements for the employer. (Employees may also contribute to their own IRAs separately.)
  • Contributions are made on a pre-tax basis, lowering the employees’ taxable income for the year of the contribution.
  • The employee is always 100% vested in the accounts, meaning that the contributions made immediately belong to him or her.
  • The employer’s contribution rate must be the same for all eligible employees.
  • The SEP-IRA’s large contribution limit offers flexibility that’s good for businesses with variable cash flow: Employers can contribute in flush years and less in difficult years.
  • Loans from SEP-IRAs are not permitted.
  • Early withdrawals will face a 10% extra tax if the withdrawer is younger than 59-1/2.
  • Beginning at age 70-1/2, required minimum distributions (RMDs) must be taken annually, as with traditional (but not Roth) IRAs.

These are the types of items that should be incorporated into your tax planning strategy, work with your accountant, or tax preparer to help improve your current and future financial health.

Would you like our help with this? Click here to schedule a call.

Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining legal, accounting, or other financial advice from an appropriate legal professional, financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.

13 Replies to “A Real Estate Agents Secret Weapon for Tax Deductions and Retirement – SEP IRA”

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