What it is The Advantages Who is eligible What it isn't Contributions What It Is A Keogh plan is a tax-deferred retirement plan designed to help self-employed workers or individuals who earn self-employed income establish a retirement savings program. There are two different types of Keogh plans, the profit sharing and the money purchase plan. Under Keogh regulations, the Money Purchase contribution is mandatory; you must make the same percentage contribution each year, whether you have profits or not. The Profit Sharing contribution can change each year. Individuals can contribute to both types of plans in the same year. The most attractive feature of Keoghs is the high maximum contribution they allow. Contributions are made by the self-employed person, and contributions and the investment earnings can grow tax-deferred until withdrawal (assumed to be retirement), at which time they are taxed as ordinary income. The Advantages Tax-Deferred Contributions and Earnings Your contributions are taken pre-tax, reducing your taxable salary, and both the contributions and earnings can grow tax-deferred until they are withdrawn. Tax-deferred contributions and earnings make up the best one-two punch in investing. Compare the Results High Maximums For self-employed workers, Keoghs offer the ability to set aside the largest amount of money in a retirement plan. Ability to Invest in Regular IRAs In addition to the high maximums, you retain the opportunity to invest in regular IRAs. Who Is Eligible Keoghs are designed for workers or partners with self-employment income. Currently, Keoghs are for self-employed individuals or partners, including sole proprietors who file Schedule C or a partnership whose members file Schedule E. What It Isn't See 401 k, SEP-IRA, SARSEP-IRA, and SIMPLE-IRA to learn how other tax-deferred retirement plans offered by businesses differ from the Keogh. To see which retirement plan is right for your business, click here. Contributions Contributions to a Keogh can be made for the tax year from January 1 of that year until April 15 of the next year. However, the Keogh account must be opened by December 31 of the tax year for which the deduction is to be claimed. Money-purchase plans contributions are limited to the lesser of $40,000 or 25% of your self-employment income. Profit-sharing keogh contributions can vary in a given year from 0% - 20% of new business income maxing out at $40,000. The tax information provided is for informational purposes only and is not intended, and should not be construed, as tax advice or a recommendation. Intuit does not provide legal, tax, or investment advice and you should consult with a professional tax advisor about your individual circumstances.