SIMPLE IRA Plan — Contribution Limits: Retirement Plans for Business Owners (2025 IRS Guide)

This guide covers “SIMPLE IRA Plan — Contribution Limits” within retirement plans for business owners. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 560 (2025), Retirement Plans for Small Business, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

A SIMPLE IRA plan is a retirement plan that uses a SIMPLE IRA for each eligible employee. Under a SIMPLE IRA plan, a SIMPLE IRA must be set up for each eligible employee (the SIMPLE IRA may either be a traditional SIMPLE IRA or a Roth SIMPLE IRA). For the definition of an eligible employee, see Who Can Participate in a SIMPLE IRA Plan, later.

SIMPLE IRA Plan — Contribution Limits

Contributions are made up of salary reduction contributions and employer contributions. You, as the employer, must make either matching contributions or nonelective contributions, defined later. No other contributions can be made to the SIMPLE IRA plan. These contributions, which you can deduct, must be made timely. See Time limits for contributing funds, later.

Salary reduction contributions.

The amount the employee chooses to have you contribute to a SIMPLE IRA on their behalf generally can't be more than $16,500 for 2025 and increases to $17,000 for 2026. Pursuant to section 117 of the SECURE 2.0 Act of 2022, a higher limit of $17,600 may apply to participants in SIMPLE IRA plans for certain employers for 2025. These contributions must be expressed as a percentage of the employee's compensation unless you permit the employee to express them as a specific dollar amount. You can't place restrictions on the contribution amount (such as limiting the contribution percentage), except to comply with the $16,500 limit for 2025 ($17,000 for 2026).

If you or an employee participates in any other qualified plan during the year and you or your employee has salary reduction contributions (elective deferrals) under those plans, the salary reduction contributions under a SIMPLE IRA plan also count toward the overall annual limit ($23,500 for 2025; $24,500 for 2026) on exclusion of salary reduction contributions and other elective deferrals.

Catch-up contributions.

A SIMPLE IRA plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. The catch-up contribution limit for SIMPLE IRA plans is generally $3,500 for 2025 and $4,000 for 2026. Pursuant to section 117(b) of the SECURE 2.0 Act of 2022, a higher catch-up limit of $3,850 may apply to participants in SIMPLE IRA plans of certain employers for 2025. Salary reduction contributions aren't treated as catch-up contributions until they exceed $16,500 for 2025 ($17,000 for 2026). However, the catch-up contribution a participant can make for a year can't exceed the lesser of the following amounts.

• The catch-up contribution limit.

• The excess of the participant's compensation over the salary reduction contributions that aren't catch-up contributions.

Beginning in 2025, section 109 of the SECURE 2.0 Act of 2022 permits SIMPLE plans (including SIMPLE 401(k) and SIMPLE IRA plans) to allow participants to make a higher amount of catch-up contributions in a tax year in which they attain age 60, 61, 62, or 63. For 2025 and 2026, the higher limit on catch-up contributions to SIMPLE plans for such participants is $5,250.

Employer matching contributions.

You are generally required to match each employee's salary reduction contribution(s) on a dollar-for-dollar basis up to 3% of the employee's compensation, where only employees who have elected to make contributions will receive an employer matching contribution. Pursuant to section 117 of the SECURE 2.0 Act of 2022, higher matching contributions apply for certain employers who elect to allow higher salary reduction contributions. This requirement doesn't apply if you make nonelective contributions, as discussed later.

Example.

In 2025, your employee earned $25,000 and chose to defer 5% of their salary. The net earnings from self-employment are $40,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. You make 3% matching contributions. The total contribution made for the employee is $2,000, figured as follows.

The total contribution you make for yourself is $5,200, figured as follows.

Lower percentage.

If you choose a matching contribution less than 3%, the percentage must be at least 1%. You must notify the employees of the lower match within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. You can't choose a percentage less than 3% for more than 2 years during the 5-year period that ends with (and includes) the year for which the choice is effective.

Nonelective contributions.

Instead of matching contributions, you can choose to make nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 (or some lower amount you select) of compensation from you for the year. Pursuant to section 117 of the SECURE 2.0 Act of 2022, higher nonelective contributions apply for certain employers who elect to allow higher salary reduction contributions. If you make this choice, you must make nonelective contributions whether or not the employee chooses to make salary reduction contributions. Only $350,000 of the employee's compensation can be taken into account to figure the contribution limit in 2025 ($360,000 in 2026).

If you choose this 2% contribution formula, you must notify the employees within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year.

Example 1.

In 2025, your employee, Jane Wood, earned $36,000 and chose to have you contribute 10% of her salary. Your net earnings from self-employment are $50,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. You make a 2% nonelective contribution. Both of you are under age 50. The total contribution you make for Jane is $4,320, figured as follows.

The total contribution you make for yourself is $6,000, figured as follows.

Example 2.

Using the same facts as in Example 1 above, the maximum contribution you make for Jane or for yourself if you each earned $75,000 is $14,000, figured as follows.

Time limits for contributing funds.

You must make the salary reduction contributions to the SIMPLE IRA within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. You must make matching contributions or nonelective contributions by the due date (including extensions) for filing your federal income tax return for the year. Certain plans subject to DOL rules may have an earlier due date for salary reduction contributions.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

• Publication 560 (2025), Retirement Plans for Small Business: SIMPLE Plans — SIMPLE IRA Plan — Contribution Limits — Internal Revenue Service; 2025 edition.

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.