Maximize Your Tax Deductions
One way to save more money for retirement is to give less of it back to Uncle Sam. Remember, all three of the most common self-employment retirement plans — solo 401(k), SEP IRA and SIMPLE IRA — are pretax plans. That means that every cent you save for retirement is deducted from your taxable income. In fact, contributions to retirement plans are the No. 1 tax deduction for self-employed business owners [source: TurboTax].
Pay attention to the contribution limits that we talked about earlier. If you have enough income to put the maximum away, you can personally deduct up to $51,000 with both an SEP IRA and a solo 401(k). But with an SEP, you can also deduct the contributions you make to employee accounts up to an additional $51,000 each. The limit for a SIMPLE plan is considerably lower at $12,000 for employees under 50, but if you have employees you can also deduct any contributions you make on their behalf.