Saving for the self-employed
As it was mentioned in the last blog, that saving for retirement, is always a wise tax planning scheme, because it deferrer’s one’s income from being taxed until reaching the “golden years” of retirement. For most employees the retirement plan is either establishing an IRA, and/or participating in a company’s §401(k) plan (if offered) but what about the self-employed person?
For the self-employed, there are significantly more options than just establishing an IRA and here are some plans:
Simplified Employee Pension (SEP IRA) – who is really geared towards the self-employed & has a maximum contribution of $ 52,000 for 2014, unlike the maximum contribution of $5,500 for regular IRAs, and there is a tax deduction as well for SEP IRA contributions.
Savings Incentive Match Plan for Employees IRA (SIMPLE IRA), it is similar – to a §401(k) matching plan, but is more “simplified”, and the maximum contribution for 2014 is $12,000 for the “employee’s” part, and the these contributions for the “employee’s” part are not tax deductible, but the mandatory “employer’s” part is tax deductible directly as an operating business expense.
Finally, a §401(k) plan can be set up for the self-employed (without being incorporated) for a maximum combined contribution of $52,000 ($17,500 for the “employee’s” part & $34,500 for the “employer” part), which the “employer” part is tax deductible directly, as an operating business expense.
So that’s a few of the available retirement plans that are available for the self-employed, and if you want us to discuss this in details, please contact us at http://www.kayatax.com/blog