The Best Retirement Plans to Slash Your 2024 Tax Bill
If you’re self-employed and haven’t set up a retirement plan yet, you’re leaving money on the table. The IRS gives generous tax breaks to business owners who take advantage of retirement savings plans—and it’s not too late to reduce your 2024 tax bill.
Whether you’re a sole proprietor or a single-member LLC, there are a few standout retirement plan options that can help you keep more of your hard-earned cash. Let’s break them down.
1. SEP IRA – The No-Fuss, High-Limit Option
The Simplified Employee Pension (SEP) IRA is a straightforward retirement plan that lets you contribute up to 20% of your net self-employment income, with a max contribution of $69,000 for 2024.
Why You’ll Love It:
✅ Easy setup – Fill out Form 5305-SEP at your brokerage firm in minutes.
✅ No ongoing admin – No annual filing required.
✅ Last-minute tax savings – You can set up and contribute until your tax return deadline (including extensions).
The Drawback:
🚫 No borrowing – Unlike some other plans, you can’t take a loan from your SEP account.
Best For: Business owners with high earnings who want simplicity and flexibility.
2. Solo 401(k) – The Heavyweight Tax Saver
If you want to maximize your retirement savings while slashing taxes, a Solo 401(k) is your best bet. You can contribute in two ways:
Elective deferrals up to $23,000 ($30,500 if you’re 50+).
Employer contributions up to 20% of net self-employment income, capped at $69,000 ($76,500 if you’re 50+).
Why You’ll Love It:
✅ Higher contribution limits – Max out both elective deferrals and employer contributions.
✅ Catch-up contributions – Extra $7,500 if you’re 50+.
✅ Loan options – Unlike a SEP, you can borrow from your Solo 401(k).
The Drawback:
🚨 More paperwork – You’ll need to file Form 5500-EZ once your account hits $250,000.
Best For: High-income earners who want to contribute the max and may need loan access.
3. SIMPLE IRA – A Solid Choice for Lower Incomes
If your business income is modest, a SIMPLE IRA could be a great fit. You can contribute:
Up to $16,000 in elective deferrals.
A 3% employer match (which you also contribute if you’re self-employed).
If you’re 50+, you can add another $3,500 in catch-up contributions, bringing the total to $19,500.
Why You’ll Love It:
✅ Great for modest incomes – Allows higher contributions than a SEP at lower income levels.
✅ Easy to set up and manage – No annual filing requirements.
The Drawback:
❌ Missed the 2024 deadline – You needed to set up a SIMPLE IRA by October 1, 2024, to claim it for this tax year.
Best For: Business owners with lower self-employment income who want a simple, tax-efficient plan.
4. Keogh Plan – A SEP with Loan Perks
A Defined Contribution Keogh Plan works a lot like a SEP, with the same 20% contribution rule and $69,000 max. However, you can borrow from a Keogh plan, making it a bit more flexible.
The Drawback:
❌ Extra paperwork – If your balance hits $250,000, you need to file Form 5500-EZ.
Best For: High earners who want SEP benefits but also want loan access.
Which Plan Should You Choose?
🚀 Making over $230K? – A Solo 401(k) lets you contribute the most.
💰 Want simple and flexible? – A SEP IRA is the easiest option.
📉 Earning under $50K? – A SIMPLE IRA may allow you to save more.
🏦 Need borrowing access? – A Solo 401(k) or Keogh plan is your best bet.
The biggest takeaway? Don’t wait! You still have time to set up a SEP or Solo 401(k) and cut your 2024 tax bill—just be sure to set it up before filing your tax return.
Want expert help finding the best tax-saving strategies for your business? Let’s talk.