SEP IRA
A retirement account a business owner funds for themselves and any eligible employees, up to 25% of pay or a yearly dollar cap.
SEP stands for Simplified Employee Pension. Only the employer contributes, and the amount can change each year, including $0. For a sole proprietor, the 25% rate works out to about 20% of net profit after subtracting half of self-employment tax.
You can open and fund a SEP IRA up to your tax filing deadline, including extensions. If you have eligible employees, you must contribute the same percentage of pay for them as for yourself.
Example
Net profit of $80,000 minus half of self-employment tax ($5,652) is $74,348. $74,348 × 20% = $14,870 into a SEP IRA.