What this line means
Contributions you made to a SEP-IRA, SIMPLE IRA, or other qualified retirement plan as a self-employed individual. These contributions reduce your taxable income as an above-the-line deduction. For 2025, the maximum combined contribution to a SEP-IRA or solo 401(k) is $70,000. This line is only for self-employed retirement plan contributions — employer-sponsored 401(k) contributions by W-2 employees are already excluded from wages on the W-2.
Does this apply to you?
- You are self-employed and contribute to a SEP-IRA
- You are self-employed and contribute to a SIMPLE IRA
- You are a sole proprietor with a solo 401(k)
- You contribute to any qualified retirement plan based on self-employment income
Easy to overlook
The SEP contribution limit is based on net earnings, not gross revenue Your maximum SEP-IRA contribution is 25% of net self-employment earnings, but “net earnings” means net profit from Schedule C minus the deductible half of self-employment tax. 1 The effective contribution rate is about 20% of Schedule C net profit before the SE tax deduction. A sole proprietor with $100,000 net profit cannot contribute $25,000 — the actual maximum is closer to $18,587 after the required reduction for SE tax. General filing pattern — SEP contribution limit miscalculated
You can contribute to a SEP-IRA up to the tax filing deadline Unlike most retirement contributions that must be made by December 31, SEP-IRA contributions can be made up to the due date of your return, including extensions. 2 If you file an extension, you have until October 15 to make your 2025 SEP contribution. This gives self-employed filers an extra nine months to fund their retirement and reduce their tax bill. IRS Publication 560 — Retirement Plans for Small Business
Watch out for this
Claiming both a SEP contribution here and a traditional IRA deduction on line 20 for amounts that exceed the combined limits. SEP contributions and traditional IRA contributions are separate plans with separate limits. However, having a SEP makes your traditional IRA contribution nondeductible if your income exceeds the phaseout thresholds (you are considered “covered by an employer plan” if you have a SEP).
Footnotes
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IRS Publication 560, Retirement Plans for Small Business, SEP Contribution Limits. https://www.irs.gov/pub/irs-pdf/p560.pdf ↩
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IRS Publication 560, Retirement Plans for Small Business, When to Set Up and Fund a SEP. https://www.irs.gov/pub/irs-pdf/p560.pdf ↩