SEP-IRA Contribution Calculator
Calculate your 2026 SEP-IRA maximum contribution as a self-employed worker or small business owner. Uses the IRS 20% effective rate on net self-employment earnings (after the half-SE-tax adjustment), capped at $70,000.
What Is a SEP-IRA?
A SEP-IRA (Simplified Employee Pension) is a retirement plan built for self-employed workers and small businesses. It allows employer-only contributions of up to 25% of compensation, is easy to administer (no annual Form 5500), and has no employee matching requirements. For solo freelancers it acts like a tax-deductible retirement bucket that scales with income.
2026 SEP-IRA Contribution Limit
The 2026 SEP-IRA limit is the lesser of 25% of net self-employment earnings or $70,000. For Schedule C filers, the effective rate is 20% of net earnings (net profit minus half of self-employment tax), because the IRS formula applies 25% to the post-contribution base. Compensation above $350,000 (2026 cap) is ignored when calculating the 25% share.
SEP-IRA vs Solo 401(k)
At lower incomes, Solo 401(k) wins big because its $23,500 employee deferral is not tied to income — a freelancer earning $30,000 can save roughly $29,500 in a Solo 401(k) but only $5,580 in a SEP-IRA. At higher incomes both plans converge on the $70,000 cap. SEP-IRAs are simpler (no plan document), while Solo 401(k)s allow Roth treatment, loans, and spouse participation.
SEP-IRA Deadlines and Rules
You can establish and fund a SEP-IRA as late as the tax filing deadline including extensions (typically October 15 of the following year). Contributions are fully tax-deductible against self-employment income. Withdrawals before 59½ face a 10% early-withdrawal penalty plus ordinary income tax. Required minimum distributions begin at age 73.
Frequently Asked Questions
What is the 2026 SEP-IRA contribution limit?
The 2026 SEP-IRA limit is the lesser of 25% of compensation or $70,000. For Schedule C filers the effective rate on gross self-employment income is about 20% after the half-SE-tax adjustment.
Is a SEP-IRA better than a Solo 401(k)?
Only at very high incomes or when simplicity matters. Solo 401(k)s let you save far more at moderate incomes because of the employee deferral. SEP-IRAs win on paperwork simplicity and are valid with multiple employees.
When is the SEP-IRA contribution deadline?
You can establish and fund a SEP-IRA as late as your tax filing deadline including extensions — typically October 15 of the year after the tax year.
Can I have both a SEP-IRA and a traditional IRA?
Yes. You can contribute up to $7,000 ($8,000 if 50+) to a traditional or Roth IRA separately from your SEP-IRA. However, a SEP contribution may make your traditional IRA non-deductible depending on income.
Do SEP-IRA contributions reduce self-employment tax?
No. SEP-IRA contributions reduce federal and state income tax but do not reduce the 15.3% self-employment tax (Social Security + Medicare). Only business expenses on Schedule C reduce SE tax.
What if I hire employees?
SEP-IRAs require you to contribute the same percentage for all eligible employees. If you hire full-time W-2 staff, either switch to a Solo 401(k) before hiring (while still owner-only) or budget for the matching contributions.