A SEP IRA is a Simplified Employee Pension individual retirement account. SEP IRA contributions are tax deductible, and the money grows tax-free, but you have to report distributions from your SEP IRA as taxable income when you make a withdrawal. When you make a contribution to your SEP IRA, you will receive a form 5498 from your financial institution documenting your contribution. The tax deduction for making SEP IRA contributions is an adjustment to income, which means that you can claim the deduction on top of the standard deduction.
Things You'll Need
- Form 5498
- Form 1040
Complete form 5498 from your financial institution documenting your contribution. If you have multiple SEP IRAs that you contributed to during the year, gather all of them. The form will show your SEP IRA contributions for the year in "Box 8".
File your taxes using form 1040. In order to claim a deduction for your SEP IRA contribution, you cannot use form 1040EZ or form 1040A.
Report the amount of your SEP contribution on "Line 28" of your form 1040 tax return. This amount will be deducted from your taxable income when you calculate your adjusted gross income.