Your Self-Directed SEP IRA

If you are self-employed you have the option of a Self-Directed SEP IRA, which stands for Simplified Employee Pension, for part or all of your retirement plan.

In addition, a Self-Directed SEP IRA applies to small business owners, typically with up to 25 employees, who can also include a spouse, grown children, and other family members who are employees of the business.

Your Self-Directed SEP IRA allows an annual contribution up to $55,000 per year for 2018, $56,000 for 2019 (per individual). Contributions do not need to be scheduled or consistent, since only a few individuals would be able to contribute $4,500 every month. This tends to be ideal for those that earn quarterly or annual bonuses in large sums since the contributions are tax-free until such time as they are withdrawn.

This is where small business owners can take even more advantage of the high level of contributions allowed. Under this plan, an employer may contribute up to 25% of each employee’s annual compensation (up to $270,000 per employee) to the plan. Such a contribution, over the course of one year, would be in addition to the amount (up to $55,000/$56,000 depending on the tax year) the employee contributes as an individual.

An employer can offer this, whether a corporation, partnership, or operating as self-employed. In order to be eligible, an employee must be at least 21 years of age, have been an employee of the business for a minimum of three of the past five years, and have earned a minimum of $600 in compensation. Again, this can include a spouse, grown children, and other family members who meet the appropriate employment qualifications.

However, an employer is required, under this plan, to have its contribution percentage between 0% and 25% of the earnings of each employee each year. For example, XYZ Corporation allots 6% of each employee’s earnings as its contribution. Since employee earnings generally vary based on the position and responsibilities, the amounts contributed will vary from recipient to recipient.

Since the amount each employee may contribute to his/her own plan also varies, operating a Self-Directed SEP IRA does not automatically mean that each participant in the same plan would have the same amount of contributions each year.

A self-employed individual does not need to be an employer or part of a corporation or partnership in order to participate. Thus, a real estate broker, insurance agent, or independent contractor (for example) is able to participate in a Self-Directed SEP IRA plan as well.

Suppose the owner of XYZ Corporation uses her Self-Directed SEP IRA for this purpose. Her choice is to use a portion of these funds to purchase real estate. She is able to sell a property she purchased earlier, and the sale generates a profit of $48,000.

Not only does this account grow by $48,000 (which she could re-invest in real estate or any other eligible purchase). The most important thing is that this would be in addition to whatever amount she contributes for the year. Thus, if she is able to contribute the maximum $55,000 (for 2018), her total contribution to her Self-Directed SEP IRA would now be $103,000 for the year.

Another advantage is that her business (XYZ Corporation) does not pay any taxes on the investment earnings within her Self-Directed SEP IRA.

This reflects the impact of doing a Self-Directed SEP IRA. Because it is self-directed, you are able to invest your funds in real estate, precious metals, notes, and certain related short or long-term investments.

Thus, it is not only the size of the contribution you are able to make (and possibly receive), but the ability to grow your funds through investments you elect.

There is still one more big advantage to a small business owner offering this to employees, including appropriate family members who meet the qualifications.

A Self-Directed SEP IRA also does not have the start-up and ongoing maintenance costs generally associated with managing a conventional 401K and/or profit-sharing plan!

As a result, it is possible that thousands of dollars of annual managing and administrative fees are saved by the employer. Even if the savings were “only” $2,500 per year, over the course of 20 years it means a long-term savings of $50,000.

Even without employees, many advantages remain to operating your Self-Directed SEP IRA.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at

Self-Directed IRA Plans for Small Business Owners

ereader_news_800_wht_8849There’s a lot of press out there about the Self-Directed IRA.

The problem with the IRA, however, is that while you can roll over as much money that’s already in other qualified retirement plans as you as you want you can only contribute a relatively small amount of new money each year. In 2015, most people can contribute up to $5,500 into a traditional or Roth IRA, provided they meet the income qualifications (double that amount to account for spousal IRAs, in the case of married couples where one spouse has less than $5,500 in earned income.

There is a special ‘catch-up’ provision that allows individuals age 50 or older to contribute an additional $1,000 per year. But that still leaves Self-Directed IRA holders with a relatively small amount of allowable IRA contributions each year.

Many of our clients find that while they are very attracted to the idea of taking personal control over their retirement investments rather than delegate it to some mediocre mutual fund or money manager they’ve never met, they would like to contribute substantially more money to the strategy.

Fortunately for them, there’s a solution: the option of self-direction also extends to a number of other retirement plans.

Let’s take a look at some options:

Simplified Employee Pension plans (SEPS)

gold_nest_egg_ribbon_800_wht_2725(1)These plans allow employers to make substantial contributions toward employees’ retirement security, but they are much easier to set up than large 401(k) and other plans. These plans are very popular among owner-employees of very small companies with no or few full-time employees other than the owner, because they allow for a contribution of up to 25 percent of compensation, or $53,000 per year (whichever is less). In most cases, that is substantially more than an IRA alone will allow.

Moreover, contributions to a SEP do not negatively affect your eligibility for contributions to an IRA. You can do both.

Solo 401(k) Plans

These are 401(k) plans that are specially designed for very small companies with just one or two owner/employees – commonly a married couple. These plans allow for both employee and employer contributions, and in many cases allow for even greater allowable contributions than the SEP. These plans are much easier and cheaper to establish than traditional pension plans and full-scale 401(k) plans, and also allow for substantial asset protection against the possible claims of creditors.

[tweetthis twitter_handles=”@iraexpert” hidden_hashtags=”#SelfDirectedIRA”]There’s a lot of press out there about the Self-Directed IRA…[/tweetthis]

The Solo 401(k) is also available in a Roth option. That means you can make contributions on an after-tax basis, and assets grow free of federal income taxes for as long as you live. They are also not subject to required minimum distributions.


These plans are sort of a 401(k) lite, for employers with fewer than 100 businesses. business_woman_holding_briefcase_17207Employees can make pretax contributions to these plans, and employers can make matching or flat-rate contributions on employees’ behalf (subject to certain rules).

We have hundreds of small business owner clients nationwide that use accounts like these to help them direct tax-advantaged retirement dollars at potentially lucrative but unconventional IRA assets like direct ownership of real estate, gold and precious metals, tax liens and certificates, farms and ranches, partnerships and LLCs, closely held businesses, foreign assets, oil and gas, non-traded securities, private placements, venture capital and much more.

If you think you can benefit from this kind of freedom within your retirement investments, and you want to take more control over your own retirement assets, please call us right now at 866-7500-IRA(472). Or visit us online at for much more information about all aspects of self-directed retirement investing.







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SEP IRAs And Real Estate

Looking to own real estate in a tax-deferred vehicle? The Self-Directed SEP IRA is a compelling choice. Like the Traditional IRA, the SEP IRA offers the advantage of a current year tax deduction for contributions and the deferral of income and capital gains taxes*

What sets them apart from their Traditional IRA account cousins is this: A much higher allowable contribution limit. For 2015, that means up to $53,000 per year, or 25 percent of compensation, whichever is less. (For self-employed individuals, the calculation is somewhat different because of the effect of self-employment taxes on applicable income. If all income is self-employment income, you can expect a cap of about 20 percent of compensation rather than 25 percent).

The SEP IRA is one of two IRS-recognized retirement plans for small-business owners, the other primary option being the 401(k). For the sole proprietor or those with only one full-time employees, or businesses that are run by a married couple, the usual alternative to the SEP IRA is the “solo 401(k)” or “individual 401(k).” Each has advantages and disadvantages, of course.

SEP IRA Advantages:

  • Contributions are tax-deductible to the contribution individual or business.
  • Businesses pay no tax on investment earnings.
  • Individuals/beneficiaries pay no income tax and no capital gains tax until distributions (except for unrelated debt-financed income tax on income attributable to outside leverage, if applicable. Call us for more information on UDIT taxes and real estate SEP IRAs).
  • Plan sponsors are not locked into specific annual contributions.
  • Business owners/plan sponsors have full control over whether they make contributions and how much to contribute.
  • You may qualify for a tax credit of up to $500 per year for the first three years of putting a plan in place.
  • Low administration costs and overhead compared to traditional pension plans and 401(k) plans.

Who Should Have a Self-Directed SEP IRA?

Whether you choose to self-direct your SEP IRA and route your investments into real estate or not, the SEP IRA generally works best in the following circumstances:

  • You have significant income from a closely-held business with 25 employees or fewer, or from self-employment.
    • Sole proprietorships, S corporations, C corporations, partnerships and LLCs are all eligible
  • You can contribute significant amounts to the SEP IRA.
  • You expect not to need income from the SEP until age 59 ½ or later.
  • You want to defer taxes on gains and income.

Employees of SEP IRA sponsors must meet these requirements to participate:

  • Be age 21 or older
  • Work for the business during any three of the past five years
  • Have earned a minimum annual required compensation of $500.

Note: If you have employees, all eligible employees must participate in the plan, including part-timers, seasonal employees, and deceased employees who died during the plan year.

For Real Estate

SEP IRAs allow you to make much larger contributions each year than traditional or Roth IRAs. There are also no income restrictions on SEP IRA contribution eligibility. This allows those who use real estate SEP IRAs to fund much more substantial down payments, repairs and renovations with new contributions than are generally available within traditional IRAs, except where money can be rolled over into the IRA from another source. For example:

Suppose you own an investment property within a self-directed account and you discover it needs a new roof that will cost $30,000 to put in. If you own it in a traditional IRA, at best you can only contribute $5,500 in new money – and depending on your income, you may well not be able to contribute at all. You will have to buy the whole roof by freeing up money from within the IRA, by rolling over qualified money from outside the IRA, or by borrowing – and potentially generating UDIT tax liability down the road.

Owning it within a SEP IRA allows you to potentially buy the new roof with cash, get a tax deduction for it since it’s still a SEP IRA contribution, and you still have up to $23,000 in potential contribution eligibility on top of that.

Overall, it is a much more flexible vehicle for real estate investors with significant income from a business or self-employment than a traditional IRA. The same liquidity issues also apply to Roth IRAs, too, though the tax treatment is different.

American IRA, LLC is a leading national expert on the use of SEP IRAs to invest in real estate. For specific information on how you can get started, call us today at 866-7500-IRA(472), or visit us on the Web at We have an extensive library of resources to peruse for the serious real estate investor available for free download.

We look forward to serving you.

*Note: SEP IRAs are potentially subject to unrelated debt-financed income taxes on income or profits attributable to leverage. Call us or speak with your tax advisor for more information.

Self-Directed SEP IRAs – The Basics

SEP IRAMany people have already heard about real estate IRAs, gold IRAs, and Self-Directed IRAs in general. What is less well understood, however, is that the self-direction concept isn’t limited to IRAs. You can also gain the same flexibility, versatility and potential for diversification from other kinds of retirement plans as well – including the Simplified Employee Pension Plan, or SEP IRA.

SEPs have become very popular with small business owners in recent years for a variety of reasons:

o   They offer generous contribution limits that are several times higher than those for IRAs. In 2014, SEP plan sponsors can contribute up to 25 percent of compensation to their SEPs, up to an annual limit of $52,000.

o   They are much less expensive to set up than traditional 401(k) plans and defined benefit pension plans.

o   They do not lock business owners into making a specific contribution every year.

o   They do not require an actuary

SEPs are particularly well suited to self-employed individuals or owner-operators who are the only full-time employee of their own businesses, and who have a significant amount of free cash flow to invest. However, you are not obligated to invest in the SEP if you have a tough year. If you do have employees, however, and you choose to fund your own account, you must fund theirs as well.

SEP Eligibility

To participate in a SEP IRA, an employee must be at least 21 years old and must have worked for the company in at least three of the last five years.

Self-Directed SEP Investment Options

  • Like their IRA cousins, SEPs allow you to self-direct. If you are dissatisfied with the mediocre returns commonly available in mutual funds and publicly traded stocks and bonds. As s SEP Owner, you can own any of these alternative asset classes within your self-directed SEP IRA:

o   Rental real estate

o   ‘Fix and flip’ properties

o   Commercial real estate

o   Tax liens and certificates

o   Private lending

o   Hard-money lending

o   Land banking

o   Private equity

o   Closely-held companies

o   Partnerships and LLCs

o   Gold and other precious metals (with some restrictions)

o   Unregistered securities

o   Individual stocks and bonds

…And much more. Just be sure not to try to invest your SEP money in a small list of assets the IRS prohibits within retirement accounts:

o   Gems and jewelry

o   Life insurance

o   Collectibles

o   Alcoholic beverages

o   Certain forms of precious metals of inconsistent purity standards.

There are also some restrictions on counterparties in your SEP transactions. Specifically, your SEP IRA cannot directly conduct business with you, your spouse, your direct ascendants, descendants, any of their spouses, nor any entity controlled by them. You cannot buy from, sell to or rent to any of them, nor can you lend SEP money to or borrow from them – even if your SEP is engaged in the business of lending money. These rules are designed to prohibit the abuse of the tax advantages of the SEP IRA.

Who Should Consider a Self-Directed SEP IRA?

Consider a self-directed SEP IRA if many of the following criteria apply to you:

  • You are a sole proprietor, independent contractor or self-employed
  • You want to make contributions for yourself as well as for any employees
  • You don’t want to be locked in to an inflexible contribution every year
  • You have a significant amount – over IRA limits (currently $5,500 or $6,500 for those aged 50 and older) to invest every year
  • You want a broader array of investment options than those available to you in an ‘off-the-shelf’ program.

Self-Directed SEP IRA Contribution limits

The current contribution limit is 25 percent of your total compensation for the year, up to a maximum contribution of $52,000.

To learn more, simply log on to our website and enroll in one of our free, no-obligation webinars. We’ll walk you through all the basics. Or give us a call at 1-866-7500-IRA (472). We can walk you through the process and give you a personalized assessment for your own particular circumstances.



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Alternative Self-Directed IRA Investments for the Self-Employed and Small Business Owner – Part 1

Self-Directed SEP IRAsSelf-directed IRAs allow you to take personal charge of your IRA holdings and direct your investment dollars into any number of non-traditional retirement account holdings – including real estate, private IRA lending, private placements, tax liens, precious metals, and much more. This can be an important factor in diversifying your retirement portfolio, or allowing you to pursue greater returns than you may expect in stocks, bonds, mutual funds and CDs.

Good News

The good news is that the many benefits of self-directed IRA accounts aren’t limited to IRAs. The tax code also allows you to use self-direction within other popular small-business retirement plans, including SEP-IRAs, SIMPLE IRAs and Solo 401(k) plans (also called “individual 401(k) plans).

Even if your income renders you ineligible to make deductible contributions to a traditional IRA, you can still make deductible contributions to these retirement plans – and in most cases, you can contribute a lot more than $5,500. Under the right circumstances, your tax deductible retirement account contributions can be as high as $51,000 in a calendar year.


The SEP IRA, or simplified employee pension plan, is one of the more popular retirement solutions for small business owners. It is relatively easy to set up, and works extremely well for organizations with just one or two highly-paid principals.

As of 2013, you can contribute up to 25 percent of your taxable compensation, or $51,000 – whichever is lower – into a SEP IRA, except for self-employed individuals (see below).

Some factors to keep in mind:

  • Your business must contribute to SEP accounts for all qualified employees.
  • Generally, a qualified employee is any employee who is at least 21 years of age, has worked for you in at least three of the previous five years, and who earned at least $550 during the year from you.
  • You aren’t required to make company contributions to employee SEPs every year. However, if you do make any contributions, you have to contribute to everyone’s account that performed services for your company that year.
  • To deduct a SEP contribution for a given tax year, you must make the contribution by the due date of your tax return for the year, including extensions.

What About Schedule C Business Owners?

Some self-employed individuals – the truly self-employed, as opposed to those who are owner-employees of their own corporations – assume that they cannot open a Solo 401(k) plan or other small-business retirement plan. This is incorrect: There is nothing in the law that prohibits you from creating and contributing to these plans, making fully tax-deductible contributions.

If you file your income taxes using a Schedule C to report business expenses, you can still contribute to any of these plans. However, calculating your maximum contribution is a little different for self-employed individuals, because you must take into account the fact that you must pay self-employment taxes. In practice, then, after self-employment taxes are accounted for, most self-employed business owners can only contribute about 20 percent of your net Schedule C income into a SEP IRA.

Getting Started

For more information on this or any type of self-directed IRA account, please feel free to contact American IRA, LLC via e-mail [] or via phone [1-866-7500-IRA(472)], or visit our website [].


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