Retirement Plans and Tax Benefits

Here are a few retirement account options and resources briefly summarized below including the traditional IRA (which is an individual account and not a business plan).

  • Individual Retirement Accounts (IRAs):You and a spouse may be able to contribute up to $5,500 each into an IRA account for 2016 ($6,500 if age 50 or over).  This includes both Traditional and Roth IRA’s for real estate agents.
  • Simplified Employee Pensions (SEP) or Solo 401(k):You can contribute up to 20% of your net self-employment income to a maximum contribution of $53,000 for 2016.
  • Simple IRA:You can contribute up to $12,500 ($15,500 if age 50 or over) per year plus employer match for 2016.
  • Profit Sharing: You can contribute up to $53,000 for 2016.
  • 401(k): For 2016 you can contribute up to $18,000 ($24,000 if age 50 or over) per year.


Tax Benefits of Contributions:

  • Deduction Benefits:When you make a deductible contribution, tax savings effectively pay a portion of your contribution. Let’s assume you qualify for and decide to make a $20,000 contribution.  Your $20,000 contribution is effectively comprised of $7,000 in tax savings (assuming a 25% federal and 10% state rate) and $13,000 of your own funds.
  • Tax Credit:The start-up costs to establish or maintain a new employee retirement plan may qualify for a credit totaling up to $1,500 ($500 for the first three years of the plan).


Retirement contribution due dates each year vary based on the type of plan.  IRA contributions are due by the due date of your tax return, generally April 15th.  Other plans are allowed to be set up and contributions made as late as the extended due date of your return, e.g. SEPs.  The extended due date for your return is typically October 15th.