Solo 401(k) vs. SEP-IRA Contribution Calculator
Self-employed retirement plans let you shelter far more than a regular IRA — see your maximum 2026 contribution to a solo 401(k) and a SEP-IRA side by side, from your actual net profit.
Maximum 2026 contribution
SEP-IRA
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- Employer contribution
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Solo 401(k)
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- Employee deferral
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- Employer contribution
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Extra room in a solo 401(k) vs. a SEP-IRA
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Estimates for tax year 2026, for informational purposes only — not tax or investment advice. Assumes a sole proprietor/single-member LLC with no common-law employees (adding employees changes SEP-IRA and solo 401(k) eligibility and cost). Consult a financial advisor before opening or funding a retirement plan.
How these limits are calculated
Both plans start from the same base: your net profit minus the deductible half of your self-employment tax, which the IRS treats as your "earned income" for retirement purposes. From there:
- SEP-IRA: your employer contribution is 20% of that earned-income figure, capped at $72,000 for 2026. That's the entire contribution — a SEP-IRA has no separate employee-deferral piece.
- Solo 401(k): you get the same 20% employer contribution, plus an employee elective deferral of up to $24,500 — more if you qualify for a catch-up contribution — with the combined total capped at $72,000 before catch-up.
- Catch-up contributions: age 50+ adds $8,000; ages 60-63 specifically get an enhanced $11,250 catch-up under SECURE 2.0. Catch-up amounts are added on top of the annual-additions limit, not counted inside it.
| Feature | SEP-IRA | Solo 401(k) |
|---|---|---|
| Employer contribution | 20% of net SE earnings | 20% of net SE earnings |
| Employee elective deferral | None | Up to $24,500 |
| Catch-up (age 50+) | None | $8,000 |
| Enhanced catch-up (age 60-63) | None | $11,250 |
| Combined annual cap (before catch-up) | $72,000 | $72,000 |
| Covers common-law employees | Yes (with rules) | No — solo/spouse only |
Which plan should you pick?
If you want the maximum possible contribution room and don't mind a bit more paperwork, the solo 401(k) wins in almost every case — it's never lower than a SEP-IRA at the same income, and often meaningfully higher for anyone under the compensation cap. A SEP-IRA is simpler to set up and administer, with no separate elective-deferral tracking, which appeals to freelancers who want the tax benefit without a second account to manage. Both are employer-sponsored plans, so if you ever hire a common-law employee (not a subcontractor — someone whose work you control the way an employer would), the rules change materially for both: a SEP-IRA generally requires proportional contributions for eligible employees, and a solo 401(k) stops qualifying entirely once you have employees other than a spouse.
Worked example: $100,000 net profit
A single freelancer with $100,000 in net self-employment profit and no other income:
- Net SE earnings (after the half-SE-tax adjustment): $92,935
- SEP-IRA maximum contribution: $18,587
- Solo 401(k) maximum contribution: $43,087 ($24,500 employee deferral + $18,587 employer)
- Extra room in the solo 401(k): $24,500
The same freelancer at age 62 qualifies for the enhanced SECURE 2.0 catch-up, raising the solo 401(k) maximum to $54,337 — $11,250 more than without the catch-up.
Frequently asked questions
Why does a solo 401(k) allow more than a SEP-IRA at the same income?
Both plans let you contribute the same employer-side amount (20% of your adjusted net self-employment earnings). A solo 401(k) adds a second bucket on top — the employee elective deferral — that a SEP-IRA doesn't have at all. The two only converge once your income is high enough that both plans hit the same overall dollar ceiling.
What is "net SE earnings" and why isn't it just my net profit?
It's net profit minus the deductible half of your self-employment tax (the same adjustment used elsewhere in this calculator) — the IRS's official measure of self-employed "earned income" for retirement-plan purposes. It's always a bit lower than net profit itself.
Can I contribute to both a SEP-IRA and a solo 401(k) in the same year?
Not in a way that gives you more room — both are employer-sponsored plans measured against the same combined annual-additions limit, so funding both doesn't stack the totals. Pick whichever plan fits your situation (a solo 401(k) for the extra employee-deferral room and loan/Roth options some providers offer; a SEP-IRA for simpler paperwork).
Does having employees change any of this?
Yes, significantly. A solo 401(k) is only available with no common-law employees (a spouse can participate too). A SEP-IRA can cover employees, but you generally must contribute the same percentage of compensation for every eligible employee that you contribute for yourself — which changes the cost calculation entirely. This calculator assumes a solo operation with no employees.