If you own a business or are self-employed and haven’t yet established a tax-advantaged retirement plan, there’s still time to act for 2025.
By setting up a Simplified Employee Pension (SEP) before filing your 2025 tax return, you can make deductible contributions that reduce your current-year tax liability. SEPs are especially attractive because they:
- Offer flexible contribution deadlines
- Are easy to establish
- Allow generous contribution limits
- Provide significant tax deductions
If you have employees, you’ll generally need to include them in the plan and make contributions on their behalf which are also deductible.
2026 Deadlines for 2025 SEP Contributions
One of the biggest advantages of a SEP is its extended setup deadline.
A SEP can be established as late as the due date (including extensions) of your business’s 2025 income tax return.
Key 2026 Deadlines
- Calendar-year partnerships & S corporations:
March 16, 2026
September 15, 2026 (if extended) - Calendar-year sole proprietors & C corporations:
April 15, 2026
October 15, 2026 (if extended) - LLCs:
Deadlines depend on elected tax classification
You also have until these same deadlines to fund the SEP and still deduct contributions on your 2025 return.
How to Set Up a SEP-IRA
SEPs are straightforward to establish.
You create a SEP by completing Form 5305-SEP, Simplified Employee Pension — Individual Retirement Accounts Contribution Agreement.
Important notes:
- The form is not filed with the IRS
- It must be kept with your permanent tax records
- A copy must be provided to each eligible employee
- A disclosure statement must also be distributed
You then contribute to your own SEP-IRA, and if applicable, to each eligible employee’s SEP-IRA.
Employee accounts are:
- Immediately 100% vested
- Not taxable to employees when contributions are made
- Taxed later when distributions are taken (typically in retirement)
SEP Contribution Limits for 2025
SEP contributions are discretionary meaning you decide each year whether and how much to contribute.
However, if you have eligible employees, you must contribute the same percentage of compensation for them as you do for yourself.
2025 Contribution Limits
- Up to 25% of compensation
- Approximately 20% of net self-employment income
- Compensation capped at $350,000
- Maximum contribution of $70,000
For comparison, 2026 limits increase to:
- Compensation capped at $360,000
- Maximum contribution of $72,000
These generous limits make SEPs especially attractive for profitable small businesses and self-employed professionals.
How a SEP Compares to Other Retirement Plans
While SEPs are simple and flexible, they’re not always the best fit.
Other retirement options may include:
- Solo 401(k) plans
- Traditional 401(k) plans
- SIMPLE IRAs
Related reading:
👉 2026 Business Tax Limits and Updates: What You Need to Know
👉 Smart 2025 Year-End Tax Moves for Your Business
Each option has different contribution rules, administrative requirements, and tax implications.
Is a SEP Right for Your Business?
SEPs are ideal for many business owners because they:
- Require minimal paperwork
- Offer high contribution limits
- Provide immediate tax deductions
- Allow late setup and funding
However, they also carry additional rules beyond what’s covered here, particularly if you have employees.
Take Action Before You File Your 2025 Return
There’s still time to establish a SEP and reduce your 2025 tax liability, but deadlines will arrive quickly in 2026.Contact our team today to determine whether a SEP is right for your business, calculate your maximum deductible contribution, and implement a strategy that maximizes your retirement savings and tax benefits.
