Two retirement plans dominate the self-employed world: the SEP IRA and the Solo 401(k). Both let you stash serious money — up to $72,000 in 2026 — but they get there through completely different mechanics. The SEP is employer contributions only (you, acting as employer). The Solo 401(k) lets you contribute as both employee and employer — and that double role is why it almost always allows a bigger deposit at the same income.

Enter your net self-employment profit, pick your age band (catch-up contributions change the math at 50 and again at 60–63), and set your marginal tax rate. The calculator returns your maximum SEP contribution, your maximum Solo 401(k) contribution (elective deferral + employer profit share), which plan allows more, and the estimated tax savings each produces. It models contribution limits and mechanics only — no investment growth projections.

Estimate only — not professional tax or retirement advice. 2026 limits verified at irs.gov on 2026-09-25: SEP max $72,000; 401(k) elective deferral $24,500 ($8,000 catch-up at 50+, $11,250 at 60–63); overall $72,000 cap excluding catch-ups. Eligibility rules (notably: Solo 401(k) requires no full-time employees other than you and your spouse) are simplified here — confirm plan eligibility with a tax professional before opening an account (see sources).

Methodology: self-employed adjusted earnings = profit − one-half SE tax (SE tax = 15.3% on 92.35% of profit up to the $184,500 wage base). SEP for the self-employed = the lesser of 25% of (adjusted earnings − contribution) or $72,000, which solves to 20% of adjusted earnings. Solo 401(k) = elective deferral ($24,500, plus catch-up by age band) + employer profit-sharing up to 25% of compensation (modeled as 20% of adjusted earnings), capped at $72,000 total excluding catch-up contributions, and total contributions can never exceed 100% of compensation (adjusted earnings). Tax savings = contribution × your marginal rate — an estimate of the income-tax shield, not a refund figure.

Key takeaways

  • 2026 IRS limits: SEP IRA max $72,000 (25% of compensation); Solo 401(k) elective deferral $24,500 with $8,000 catch-up at 50+ and $11,250 at 60–63 — overall cap $72,000 excluding catch-ups.
  • At the same profit, the Solo 401(k) almost always allows more: the $24,500 employee deferral is on top of the employer share, while the SEP is employer-only.
  • The self-employed SEP "25%" is effectively 20% of net earnings after the IRS deduction worksheet — a common source of over-contribution errors.
  • Solo 401(k) requires no full-time employees besides you and your spouse; hire staff and the plan (and its contribution room) can collapse — SEP handles employees more gracefully.
  • Contributions are tax-deferred, not tax-free: you skip tax now and pay on withdrawal in retirement.
  • This models limits and mechanics only — no growth projections, no Roth vs. traditional comparison, no state tax effects.

Revenue minus business expenses — your Schedule C bottom line.

Catch-up contributions kick in at 50, and a higher catch-up applies at 60–63.

The tax rate on your next dollar of income (your top federal bracket, roughly).

Max SEP IRA contribution—
Solo 401(k): elective deferral—
Solo 401(k): employer share—
Solo 401(k): total allowed—
Which allows more—
Est. income-tax savings—
What this means—

How it works

  1. Enter your annual net self-employment profit — the same Schedule C bottom line you use everywhere on this site.
  2. Pick your age band. Catch-up contributions add $8,000 at 50+ and $11,250 at 60–63 (2026 SECURE 2.0 rules), and they sit outside the $72,000 overall cap.
  3. The calculator first computes your SE tax, then your adjusted earnings (profit − half of SE tax) — the base every self-employed contribution formula uses.
  4. SEP: it applies the IRS self-employed deduction worksheet — nominally 25%, effectively 20% of adjusted earnings — capped at $72,000.
  5. Solo 401(k): it adds your employee deferral ($24,500 + catch-up) to an employer profit share of up to 20% of adjusted earnings, capped at $72,000 excluding catch-ups — and the combined total can never exceed 100% of your adjusted earnings.
  6. Read which plan allows more and the estimated income-tax shield at your marginal rate — then read the eligibility warnings before choosing.

Worked example

Worked example — defaults:

  • Profit: $100,000 | Age: under 50 | Marginal rate: 22%
  • SE tax: $100,000 × 92.35% = $92,350 × 15.3% = $14,129.55; half = $7,064.78
  • Adjusted earnings: $100,000 − $7,064.78 = $92,935.23 (exact: $92,935.225)
  • SEP max: 20% × $92,935.23 = $18,587.05
  • Solo 401(k): deferral $24,500 + employer 20% × $92,935.23 = $18,587.05 → $43,087.05 (under the $72,000 cap)
  • Winner: Solo 401(k) by $24,500.00 — exactly the employee deferral
  • Est. tax shield @ 22%: Solo $43,087.05 × 22% = $9,479.15 vs SEP $18,587.05 × 22% = $4,089.15

Second example — $60,000 profit, age 55, 12% marginal: adjusted earnings ≈ $55,761; SEP max = 20% × $55,761 = $11,152.23; Solo 401(k) = $24,500 deferral + $8,000 catch-up + employer $11,152.23 → $43,652.23 total (deferral + catch-up don't count against the cap). At lower incomes the catch-up dominates: the 55-year-old can shield nearly 73% of profit.

Third example — $250,000 profit, under 50, 32% marginal: adjusted earnings ≈ $235,213 (SE tax phases past the $184,500 wage base); SEP max = 20% × $235,213 = $47,042.66; Solo 401(k) = $24,500 + $47,042.66 = $71,542.66 — both brushing the $72,000 cap. At this income the plans nearly converge; the choice turns on administration cost and eligibility rather than contribution room.

Fourth example — $30,000 profit, age 62: adjusted earnings ≈ $27,881; SEP = $5,576; Solo 401(k) = deferral capped at earnings ($27,881, using part of the $11,250 catch-up room) + employer $0 = $27,881. Total contributions can never exceed your compensation — the catch-up lets a late-career freelancer shelter nearly 100% of a modest profit, but not a dollar more than was actually earned.

Frequently asked questions

What are the 2026 SEP IRA contribution limits?

The lesser of 25% of compensation or $72,000 (IRS, 2026 cost-of-living adjustments, verified September 2026). For the self-employed, the IRS deduction worksheet makes that effectively 20% of net earnings — one of the most common over-contribution errors is using 25% of net profit directly. Compensation is capped at $360,000 for the formula.

What are the 2026 Solo 401(k) contribution limits?

Elective deferral $24,500, plus $8,000 catch-up at 50+ ($11,250 at 60–63 under SECURE 2.0), plus an employer profit-sharing contribution up to 25% of compensation — with an overall cap of $72,000 excluding catch-up contributions (IRS IR-2025-111, verified September 2026). The calculator above runs all three pieces at your profit and age.

Why does the Solo 401(k) usually allow more than the SEP?

Two roles, two contribution streams. The SEP only has the employer stream (~20% of net earnings). The Solo 401(k) has the same employer stream plus a $24,500 employee deferral (and catch-ups). At $100,000 profit that is $43,087 vs $18,587 — the entire $24,500 gap is the deferral. The advantage shrinks at very high incomes where both plans hit the $72,000 ceiling.

Why is the self-employed SEP rate 20%, not 25%?

The IRS deduction worksheet. For W-2 employees, SEP contributions are 25% of compensation. For the self-employed, "compensation" is net earnings minus the contribution itself — so 25% of (earnings − contribution) solves to contribution = earnings × 25/125 = 20% of net earnings. Contributing a full 25% of net profit is the classic SEP mistake; it creates an excess contribution the IRS penalizes.

Can I have a Solo 401(k) if I have employees?

No — not if they are full-time employees other than your spouse. The "solo" in Solo 401(k) is a hard eligibility rule: one-participant plans cover only the owner and spouse. Hire staff and you must convert to a standard 401(k) or another plan. The SEP IRA handles employees more gracefully — but then you must contribute the same percentage for eligible employees as for yourself, which can be expensive.

Can I contribute to both a SEP and a Solo 401(k)?

In the same year for the same business, generally no — the IRS treats this as a controlled-group issue and the paperwork is punishing. What freelancers actually do is choose between them each year, or run a Solo 401(k) for the freelance business and a separate employer plan for a W-2 job (with combined deferral limits). If your situation spans multiple businesses, get professional advice before funding either.

Are contributions tax-deductible?

Traditional contributions are tax-deferred: they reduce this year's taxable income (the calculator's "tax shield" line) and grow untaxed until withdrawal, when withdrawals are taxed as ordinary income. Many Solo 401(k) providers also offer a Roth option — after-tax now, tax-free later. The calculator above models traditional contributions only.

What is the deadline to open and fund each plan?

SEP IRA: open and fund by your tax filing deadline including extensions (typically October 15 of the following year) — the most forgiving deadline in retirement planning. Solo 401(k): the plan must be established by December 31 of the tax year; employee deferrals have a separate deadline tied to your filing status. Miss the establishment deadline and the whole year's Solo 401(k) room vanishes.

What are the 60–63 "super catch-up" rules?

SECURE 2.0 created a higher catch-up for ages 60–63: $11,250 for 2026 instead of the standard $8,000 — an extra $3,250 of deferral room in those four years. It applies to 401(k), 403(b), and governmental 457 plans (not SEP IRAs, which have no deferrals). If you are in this band, the calculator adds it automatically.

How does the spouse affect the Solo 401(k)?

A spouse who works in the business can participate — including their own $24,500 deferral plus catch-up — effectively doubling the household's deferral room to $49,000+ while sharing the single $72,000-per-person overall cap. This is the single biggest reason married freelancers favor the Solo 401(k). The spouse must have real compensation from the business; the IRS does not accept paper-only participation.

Does contributing reduce my self-employment tax?

No. Retirement contributions reduce income tax, not self-employment tax — SE tax is computed on net earnings before contributions. Nothing in this calculator changes your 15.3%. (If SE tax itself is the pain point, see the S-corp vs. sole-prop calculator instead.)

Which plan is simpler to run?

The SEP IRA, by a mile. No annual IRS filing for small balances, one contribution formula, easy setup. The Solo 401(k) requires plan documents, and once assets exceed $250,000 you must file Form 5500-EZ annually. Freelancers choose the Solo 401(k) despite the paperwork — for the extra contribution room. If your profit is modest and simplicity matters, the SEP's ease is a genuine feature.

Sources

Last verified: 2026-09-25 This calculator is for general information only and is not tax advice. Tax rules change frequently — verify with a qualified professional before acting.

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