What is a key benefit of contributions made to a SEP IRA?

Contributions made to a SEP IRA (Simplified Employee Pension Individual Retirement Account) are indeed 100% tax deductible for the employer. This tax deduction is a significant advantage, as it reduces the taxable income of the business, allowing for potential savings on corporate taxes. Additionally, employees do not pay taxes on these contributions until they withdraw funds from the account, typically during retirement.

This tax treatment encourages business owners, especially those with self-employment income, to save for their own retirement while also benefiting their employees. SEP IRAs are particularly appealing because they allow for relatively high contribution limits compared to traditional IRAs, making them an effective tool for retirement savings.

The other options, such as tax-exempt status, guaranteed interest rates, or matching contributions from the government, do not apply to SEP IRAs, making tax deductibility the key advantage.