What is the maximum SEP IRA contribution for 2026?

25% of compensation, up to $72,000, with compensation counted up to $360,000. For self-employed people the 25% works out to 20% of net self-employment earnings after subtracting half of self-employment tax.

What was the maximum SEP IRA contribution for 2025?

25% of compensation, up to $70,000, with compensation counted up to $350,000. You can still make 2025 SEP contributions until your 2025 tax return due date, including extensions (October 15, 2026 if you extended).

Why is my SEP contribution 20%, not 25%, if I'm self-employed?

Because your own contribution is deducted from the earnings it's based on. The IRS rate table converts a 25% plan rate to 20% of net earnings (0.25 ÷ 1.25) after subtracting half of your self-employment tax.

Is a SEP IRA or solo 401(k) better?

At lower incomes a solo 401(k) usually allows more, because you can add an employee deferral ($24,500 in 2026) on top of the 20% employer contribution. At high incomes both reach the $72,000 cap. A SEP is simpler and can be opened and funded after year-end.

SEP IRA Contribution Calculator 2026 & 2025

Maximum SEP IRA contribution

–

–Federal tax saved

–State tax saved

–Real cost to you

SEP IRA vs solo 401(k) vs IRA

Plan	Max for you	Notes

SEP IRA contribution limits: 2026 and 2025

Limit	2025	2026
Maximum contribution per person	$70,000	$72,000
Contribution rate (employees and S-corp owners)	up to 25% of pay	up to 25% of pay
Contribution rate (self-employed)	20% of net SE earnings*	20% of net SE earnings*
Compensation counted, maximum	$350,000	$360,000
Minimum pay for an employee to be eligible	$750	$800
Catch-up contributions	none	none

*Net profit minus half of self-employment tax.

Why self-employed people get 20%, not 25%

For employees, 25% is simply 25% of W-2 pay. For a sole proprietor, the contribution itself is a deduction from the earnings it's calculated on. That circle is resolved by IRS Publication 560's rate table: a 25% plan rate becomes 25% ÷ 125% = 20%.

1. Net profit $100,000
2. SE tax (15.3% × 92.35%) $14,129.55
3. Minus half of SE tax $100,000 − $7,064.78 = $92,935.23
4. × 20% = $18,587.05 maximum SEP contribution
Check: 25% × ($92,935.23 − $18,587.05) = $18,587.05 ✓

If you pay yourself a W-2 salary from an S-corp, the rule is simpler: 25% of that salary, capped. Distributions from the S-corp don't count as compensation for a SEP.

Maximum SEP IRA contribution by income (2026)

Income	Self-employed (net profit)	S-corp owner (W-2 salary)	Solo 401(k), self-employed, under 50
$25,000	$4,647	$6,250	$23,234
$50,000	$9,294	$12,500	$33,794
$75,000	$13,940	$18,750	$38,440
$100,000	$18,587	$25,000	$43,087
$150,000	$27,881	$37,500	$52,381
$200,000	$37,177	$50,000	$61,677
$250,000	$47,043	$62,500	$71,543
$300,000	$56,909	$72,000	$72,000
$400,000	$72,000	$72,000	$72,000

A self-employed person hits the $72,000 cap at about $376,500 of net profit. An S-corp owner hits it at a $288,000 salary.

SEP IRA vs solo 401(k)

SEP IRA

Employer contributions only: 20% / 25%.
Can be opened and funded up to your tax-filing deadline, including extensions.
Almost no paperwork (Form 5305-SEP), no annual filing.
If you have employees, you must contribute the same percentage for each eligible employee.

Solo 401(k)

Employee deferral ($24,500 in 2026, plus catch-ups) plus the same 20%/25% employer contribution.
Usually allows far more at incomes under about $300,000.
Roth option and loans in many plans.
Only for businesses with no employees other than a spouse; Form 5500-EZ once assets pass $250,000.

Deadlines and rules to know

Deadline: your business's tax return due date, including extensions. For a sole proprietor's 2026 contribution, that's April 15, 2027, or October 15, 2027 with an extension.
Deduction: self-employed contributions go on Schedule 1, line 16. They lower income tax and the QBI deduction base, but not self-employment tax.
Employees: anyone age 21+ who worked for you in 3 of the last 5 years and earned at least $800 in 2026 must get the same percentage you give yourself.
Flexibility: you can contribute less, or nothing, in any year.
Withdrawals follow traditional IRA rules: taxed as income, with a 10% penalty before 59½ unless an exception applies.

Frequently asked questions

Can I have a SEP IRA and a 401(k) at my day job?

Yes. Your job's 401(k) deferral limit doesn't reduce your SEP. But if you also have a solo 401(k), the $24,500 employee deferral limit is shared across all 401(k) plans.

Can I contribute to a SEP IRA and a regular IRA?

Yes, up to $7,500 in 2026 ($8,600 at 50+). Whether the IRA contribution is deductible depends on your income, because having a SEP makes you an “active participant” in a retirement plan.

Is there a Roth SEP IRA?

Since SECURE 2.0, employers may allow Roth SEP contributions, which are taxable in the year they're made. Many providers don't offer them yet.

Does a loss year allow a contribution?

No. With no net self-employment earnings, the SEP contribution is $0 for that year.

Sources and method

Last reviewed: September 27, 2026.

IRS Publication 560, Retirement Plans for Small Business (rate table and deduction worksheet for self-employed). irs.gov
IRS, COLA increases for dollar limitations on benefits and contributions (2025: $70,000, $350,000, $750; 2026: $72,000, $360,000, $800). irs.gov
IRS, SEP contribution limits (including grandfathered SARSEPs). irs.gov
IRS, One-participant 401(k) plans. irs.gov

Tax savings are estimated with the year's federal brackets, the standard deduction and the QBI deduction (which the contribution reduces), plus your state rate. The comparison assumes you have no other 401(k) deferrals this year. This is an estimate, not tax advice.