Home › Retirement › SEP IRA vs Solo 401(k)
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Type your business profit (Schedule C, line 31) and your age. See the most you could put in a SEP IRA and a Solo 401(k) for 2026, with the IRS math shown.
| Example | SEP IRA | Solo 401(k) |
|---|---|---|
| $100,000 profit, under 50 (the default) | $18,587 | $43,087 |
| $100,000 profit, age 55 | $18,587 | $51,087 |
| $40,000 profit, under 50 | $7,434 | $30,837 |
| $300,000 profit, age 61 | $56,908 | $83,250 |
| S-corp, $60,000 W-2 salary, under 50 | $15,000 | $39,500 |
Hand check, row 1 (the IRS worksheet): $100,000 profit × 92.35% = $92,350 of net earnings. Self-employment tax is 15.3% of that, $14,129.55, and half of it ($7,064.78) comes off: $100,000 − $7,064.78 = $92,935.22. A plan rate of 25% works out to 20% of that for the owner (25% ÷ 125%), so the SEP limit is $18,587.04. A Solo 401(k) adds the $24,500 employee deferral on top: $24,500 + $18,587.04 = $43,087.04. The IRS's own example gets the same base: Joe's $100,000 profit, $7,065 half SE tax and $92,935 of pay for the plan (IRS).
Only the business puts money in, up to 20% of your net self-employment earnings (25% of W-2 pay from an S-corp), capped at $72,000 for 2026. No yearly IRS filing for the plan. You can open and fund it for 2026 until your tax deadline, including extensions (IRS Pub. 560).
You put in as the employee (up to $24,500, plus catch-up at 50+) and the business adds the same 20% or 25% employer part. Together, not counting catch-up, up to $72,000 (IRS). Once the plan holds over $250,000, you file Form 5500-EZ each year (IRS Pub. 560).
A Solo 401(k) allows catch-up: $8,000 at age 50 or older in 2026, or $11,250 if you're 60, 61, 62 or 63 at year-end (IRS catch-up). A SEP IRA has no catch-up, so it's capped at the employer part.
The $24,500 employee limit is per person, not per plan, so deferrals at your job use up the same room (IRS). The employer part is separate. Type your other deferrals under More options.
A SEP can be set up and funded as late as your tax-filing deadline, with extensions. A sole owner with no employees can adopt a new Solo 401(k) after year-end, by the filing deadline (without extensions), and first-year deferrals must be paid in by then (IRS Pub. 560).
Solo 401(k)s may offer Roth deferrals. Since 2023 a SEP may also let contributions go to a Roth IRA, if the plan allows it (IRS Pub. 560). Roth money is taxed now instead of later.
Education only, not investment, tax or legal advice. We show IRS rules and do math on the numbers you type; we don't tell you which plan to open or what to invest in. Assumes you have no employees (with employees, both plans have extra rules) and no W-2 wages from another job counting toward the Social Security limit. Nothing you type is sent or saved by us. No company pays to be on this page, and there are no partner links.
Up to 20% of your net self-employment earnings (profit minus half of your self-employment tax), or 25% of W-2 pay from your S-corp, up to $72,000. Example: $100,000 of profit allows $18,587.
Up to $24,500 as the employee (plus $8,000 catch-up at 50+, or $11,250 at 60 to 63) and the same 20% or 25% employer part, with $72,000 as the total before catch-up. Example: $100,000 of profit under age 50 allows $43,087.
A Solo 401(k) usually allows more at the same income because of the employee deferral, and it offers catch-up. A SEP IRA is simpler: no plan filing and one kind of contribution. Which fits depends on your income, your paperwork tolerance and whether you'll hire.
For a self-employed owner, the contribution itself lowers the pay it's based on. A 25% plan rate works out to 20% of net earnings after half of self-employment tax (IRS Pub. 560 rate table).
Education only, not investment, tax or legal advice. Limits and rules come from the IRS and SSA with dates; any returns are examples you can change. Confirm with your plan provider, IRS.gov or a tax professional before acting.
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