2026 Solo 401(k) vs. SEP-IRA Calculator
Calculate your statutory contribution ceiling under IRS Notice 2025-67 and Publication 560. Compare employee salary deferral plus employer profit sharing against SEP-IRA limits, factoring in the $11,250 SECURE 2.0 catch-up.
Solo 401(k) & SEP-IRA Limit Engine
Bound to $24,500 deferral cap and $72,000 Section 415(c) additions limitHow Solo 401(k) and SEP-IRA limits work in 2026
For self-employed professionals, freelancers, and single-member LLC owners, retirement accounts provide the single largest above-the-line tax shelter available under the Internal Revenue Code. Both accounts allow you to save pre-tax earnings, but the statutory rules governing how contributions are calculated differ significantly.
Key mechanics under IRS Notice 2025-67 & Pub 560
Employee Salary Deferral ($24,500)
Solo 401(k) plans allow you to act as both employee and employer. In your employee role, you can contribute up to 100% of net compensation up to $24,500. SEP-IRAs have no employee deferral component.
Pub 560 Self-Employed Rate Conversion
Under IRS Publication 560, self-employed contributions are calculated on net earnings after the contribution itself. This converts the stated plan rate into the statutory effective 20% rate on net earnings.
Section 415(c) Cap ($72,000)
Total regular additions (employee deferrals plus employer contributions) cannot exceed the IRS Section 415(c) limit of $72,000 (or 100% of compensation). Compensation considered is capped at $360,000 under Section 401(a)(17).
SECURE 2.0 Catch-Up ($11,250)
Catch-up contributions sit on top of the $72,000 annual additions cap. Participants age 50–59 or 64+ can add $8,000, while those age 60–63 receive the enhanced $11,250 tier under SECURE 2.0.
The formulas, and where each number comes from
The IRS requires a multi-step statutory calculation starting from your Schedule C net profit:
1. Net Schedule C Profit = Gross Business Revenue − Deductible Operating Expenses
2. SE Tax Total = Social Security (12.4% up to $184,500) + Medicare (2.9% uncapped) on 92.35% factor
3. Deductible Half of SE Tax = Total SE Tax × 50%
4. Net Earnings from Self-Employment (Pub 560 Base) = Net Profit − Deductible Half of SE Tax
5. Capped Compensation = Min(Net Earnings, $360,000)
6. Max Employer Contribution = Min(Capped Compensation × 20%, $72,000)
7. Solo 401(k) Employee Deferral = Min(Net Earnings, $24,500 − Other Job 401k Deferrals)
8. Regular Solo 401(k) Limit = Min(Net Earnings, $72,000, Employee Deferral + Max Employer)
9. Total Solo 401(k) Limit = Regular Solo 401(k) + Catch-Up Allowance ($8,000 or $11,250)
10. Total SEP-IRA Limit = Max Employer Contribution ($72,000 ceiling) Two worked examples
Solo consultant under age 50 ($120,000 net profit)
- Net Schedule C Profit: $120,000
- Deductible Half of SE Tax: $8,478
- Net Earnings Base (Pub 560): $111,522
- Employee Salary Deferral: $24,500
- Employer Profit Sharing (20%): $22,304
- Total Solo 401(k) Allowed: $46,804
- Total SEP-IRA Allowed: $22,304
- Solo 401(k) Extra Savings Room: $24,500
- Estimated Federal Tax Saved: $10,119
High-earning freelancer age 55 ($250,000 net profit)
- Net Schedule C Profit: $250,000
- Deductible Half of SE Tax: $14,787
- Net Earnings Base (Pub 560): $235,213
- Employee Deferral + Age 50+ Catch-Up: $24,500 + $8,000
- Employer Profit Sharing (20%): $47,043
- Total Solo 401(k) Allowed (with Catch-Up): $79,543
- Total SEP-IRA Allowed: $47,043
- Solo 401(k) Extra Savings Room: $32,500
- Estimated Federal Tax Saved: $20,477