Solo 401(k) vs SEP IRA Calculator 2026
Your maximum 2026 solo 401(k), SEP IRA and SIMPLE IRA contributions from net profit or S-corp wages — the $24,500 deferral, catch-ups, the 20%/25% employer share, the $72,000 overall cap and the federal tax saved. IRS 2026 limits confirmed.
| Compensation base for employer contributions | — |
|---|---|
| Solo 401(k) — employee deferral | — |
| Solo 401(k) — employer profit-sharing | — |
| Solo 401(k) — total | — |
| SEP IRA — maximum | — |
| SIMPLE IRA — maximum (for comparison) | — |
| Solo 401(k) advantage over SEP | — |
| Federal tax saved at the maximum (traditional) | — |
| Income at which SEP catches up with the solo 401(k) | — |
In short
In 2026 a solo 401(k) allows $24,500 of employee deferrals (plus $8,000 catch-up at 50, $11,250 at 60–63) and an employer contribution of 25% of W-2 wages or 20% of net self-employment profit, up to $72,000 combined plus catch-up. A SEP IRA allows only the employer share — the same 25%/20%, capped at $72,000 — so below roughly $360,000 of compensation the solo 401(k) always permits more.
Who this is for: US freelancers, consultants and owner-only businesses choosing a retirement plan for 2026.
Solo 401(k) vs SEP IRA in 2026
| Feature | Solo 401(k) | SEP IRA |
|---|---|---|
| Employee deferral | $24,500 (+$8,000 at 50; +$11,250 at 60–63) | None |
| Employer contribution | 25% of W-2 wages / 20% of net SE income | Same |
| Overall cap | $72,000 + catch-up | $72,000 |
| Roth option | Yes (deferrals; employer Roth allowed since SECURE 2.0) | Yes since 2023, if the custodian offers it |
| Deadline to open | 31 Dec for deferrals | Tax deadline incl. extensions |
| Employees | Owner (and spouse) only | Must cover eligible employees equally |
| Loans | Up to $50,000 | No |
- For a sole proprietor the "25%" employer rate works out to 20% of net profit after the SE-tax deduction, because the contribution itself reduces the base.
- The solo 401(k) wins at any income below roughly $360,000 of wages (or about $390,000 of net profit) because of the employee deferral; above that both hit the $72,000 cap and the SEP's simplicity wins.
- Both reduce qualified business income, so the QBI deduction falls by 20% of the contribution — still a large net saving.
See also: Self-Employment Tax Calculator 2026.
Assumptions
- Sole proprietor base = net profit − half of SE tax; employer share 20% of base (25% of W-2 wages for an S-corp); compensation capped at $360,000.
- Deferral $24,500 less deferrals made elsewhere; catch-up $8,000 (50+) or $11,250 (60–63); overall cap $72,000 plus catch-up.
- Tax saved from the 2026 brackets after the standard deduction; SIMPLE = $17,000 (+$4,000 catch-up) + 3% match.
Worked example
SE tax deduction $8,478 → contribution base $111,522. Solo 401(k): $24,500 deferral + 20% × $111,522 = $22,304 employer = $46,804. SEP IRA: $22,304 only. The solo 401(k) allows $24,500 more. At the maximum, federal tax falls by about $10,100 (24% and 22% brackets). A SIMPLE IRA would allow about $20,300.
Frequently asked questions
How much can I put in a solo 401(k) in 2026?
$24,500 as the employee (plus $8,000 catch-up at 50+, $11,250 at 60–63) and up to 25% of compensation as the employer, up to $72,000 combined plus catch-up.
What is the SEP IRA limit for 2026?
25% of W-2 compensation (20% of net self-employment profit), capped at $72,000; no catch-up.
Can I have both a SEP and a solo 401(k)?
Technically yes, but the employer contributions share the same 25% / $72,000 limit, so there is no extra room — pick one.
Which is better for a side hustle?
The solo 401(k) if you already max a 401(k) at your day job the employer share still works; if you have not, the deferral makes the solo 401(k) far better than a SEP.
Can my spouse contribute to my solo 401(k)?
Yes if they earn W-2 or self-employment income from the business — they get their own $24,500 deferral and employer share.
What is the deadline for 2026 contributions?
Employee deferrals must be elected by 31 December 2026; employer contributions can be made until the tax-filing deadline including extensions.
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