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Overheard my accountant say SEP IRAs are basically a cheat code for freelancers
He said I can stash 25% of my freelance income up to around $70k and deduct it all. Has anyone else set one up before December 31 and actually seen a big tax break?
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luna2612mo ago
Respectfully, I gotta push back a little here. Sure, a SEP IRA can help, but it's not some magic hack that works for everyone. Your mileage may vary a lot depending on how much you actually have to put in after living expenses. If you're barely scraping by as a freelancer, dumping 20% of your income into a retirement account might not be realistic at all. Also, that deduction lowers your taxable income, sure, but you still gotta pay self-employment tax on the whole earnings regardless. Take this with a grain of salt, but I've seen people overestimate the savings and then get surprised when their bill isn't as low as they hoped. It's a solid tool, just not a cheat code in my book.
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drews552mo ago
A buddy who does freelance graphic design says his SEP IRA saved him almost 8 grand on his taxes last year. He just dumped 20% of his earnings in there before the deadline and it really cut his bill down.
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