My husband has his own insurance business and we owe taxes for tax year 2024. He was going to contribute to a Traditional IRA to help decrease what we owe, but then I saw he could do a self employed contribution to an IRA and I think it would be more advantageous. From what I understand, he can contribute 25% of his earnings to an IRA, is that correct? Any other info you can help me on would be appreciated. Thank you.
As a self-employed individual, your husband can contribute to a 401(k) plan, called a solo 401(k). That solo 401(k) is distinct from the 401(k) account you had with your former employer.
The contribution limits of a solo 401(k) are given in this IRS document.
There are also other retirement plan alternatives outlined in that document. The contribution limits of these other plans are given in this IRS document.
"he can contribute 25% of his earnings to an IRA, is that correct?"
No, that's not correct. A sole proprietor can contribute to a SEP IRA a maximum of 20% of net earnings or $69,000, whichever is less. Net earnings are net profit minus the deductible portion of self-employment taxes. The 25% reduces to 20% because the SEP IRA contribution itself, which is an employer contribution, effectively reduces the amount that determines the amount that can be contributed. The deadline to establish a SEP plan and make a contribution for 2024 is the due date of the tax return, including extensions.