Solo 401(k) vs. SEP IRA Contribution Calculator
Compare 2026 contribution limits for S corporation owners, 1099 contractors and sole proprietors.
Business & Income Profile
Employer profit sharing is calculated as 25% of this W-2 figure.
Adjusted for 50% self-employment tax deduction (20% effective rate).
Combined Federal + State tax bracket to estimate upfront cash savings.
Solo 401(k)
SEP IRA
Solo 401(k) vs SEP IRA difference
The Solo 401(k) allows $24,500 / year more than the SEP IRA at this income.
Projected Compounded Retirement Wealth
Solo 401(k) vs. SEP IRA compounding over your investment horizon.
Projected Solo 401(k) Nest Egg
$2,494,027
Projected SEP IRA Nest Egg
$1,372,859
Plan Architecture & Feature Breakdown
| Feature | Solo 401(k) | SEP IRA |
|---|---|---|
| Employee Contribution Allowed? | Yes (Up to $24,500; $32,500 at 50+; $35,750 at 60-63) | No ($0) |
| Roth (Post-Tax) Option? | Designated Roth deferrals, if the plan allows | Roth SEP IRA, if the plan allows (SECURE 2.0 §601) |
| Participant Loan Provision? | If the plan allows: lesser of $50,000 or greater of $10,000 / 50% of vested balance | No (not permitted from IRA-based plans) |
| Backdoor Roth Compatibility | Not counted in the IRA pro-rata calculation | Counted as a traditional IRA on Form 8606 |
| Annual IRS Filing | Form 5500-EZ when assets exceed $250,000 at year end, and for the final plan year | Form 5500-EZ does not apply |
What this calculator does
This calculator works out the most a self-employed person can put into a one-participant 401(k), often called a Solo 401(k), and into a SEP IRA for 2026, and compares the two. It covers two cases: an S corporation owner paid a W-2 salary, and a sole proprietor or 1099 contractor whose income is Schedule C net profit. For each plan it shows the employee and employer portions, the total, the income tax that total would save at your rate, and what the yearly contributions would grow to over your chosen number of years.
It is for business owners with no employees other than a spouse who are choosing between the two plans or deciding how much to contribute. It does not handle businesses with other eligible employees, who would generally have to be covered too.
How the math works
A Solo 401(k) accepts two kinds of money. As the employee you can defer up to $24,500 of pay in 2026, plus a catch-up amount if you are 50 or older. As the employer the business can add a profit-sharing contribution. A SEP IRA accepts only the employer contribution. Both plans share the same overall cap: employee and employer amounts together cannot exceed $72,000, with catch-ups allowed on top, and only the first $360,000 of compensation counts. These 2026 figures come from IRS Notice 2025-67.
For an S corporation owner, the employer contribution is 25% of W-2 salary, and deferrals cannot exceed the salary itself. For a sole proprietor, the calculator follows the deduction worksheet in IRS Publication 560: self-employment tax is 15.3% of 92.35% of net profit up to the $184,500 Social Security wage base and 2.9% above it, net earnings are profit minus half of that tax, and the employer contribution is 20% of net earnings, which is the 25% plan rate applied after the contribution itself is deducted.
The tax saving is the total contribution times the rate you enter. It is income tax only: Publication 560 notes that elective deferrals are still wages for Social Security and Medicare, and deferrals designated as Roth give no upfront saving at all. The growth projection adds each year's total at the end of the year and compounds at your return. It shows a pre-tax balance; traditional contributions and their growth are taxed when withdrawn.
Worked example
The default inputs describe an S corporation owner under 50 with a $120,000 W-2 salary and a 32% combined tax rate.
- SEP IRA: 25% of $120,000 = $30,000, saving $9,600 of income tax.
- Solo 401(k): $24,500 employee deferral + the same $30,000 employer contribution = $54,500, saving $17,440.
- Difference: the Solo 401(k) allows $24,500 more, worth $7,840 of income tax at 32%.
- After 20 years at 8%: $2,494,027 for the Solo 401(k) and $1,372,859 for the SEP IRA, both before tax on withdrawal.
For a sole proprietor with $150,000 of net profit, the worksheet runs as follows. Self-employment tax is $21,194.32 (15.3% of $138,525). Half of it, $10,597.16, is deducted, leaving net earnings of $139,402.84. The employer contribution is 20% of that, $27,881, which is the whole SEP IRA amount. The Solo 401(k) adds the $24,500 deferral for $52,381 in total.
The 2026 limits the calculator uses
| Limit | 2026 amount | Applies to |
|---|---|---|
| Elective deferral, section 402(g)(1) | $24,500 (was $23,500) | Solo 401(k) only |
| Catch-up at age 50 or older | $8,000 (was $7,500) | Solo 401(k) only |
| Catch-up for those who turn 60, 61, 62 or 63 in 2026 | $11,250 (instead of $8,000) | Solo 401(k) only |
| Total annual additions, section 415(c)(1)(A) | $72,000 (was $70,000), excluding catch-ups | Both plans |
| Compensation counted, section 401(a)(17) | $360,000 (was $350,000) | Both plans |
| Roth catch-up wage threshold, section 414(v)(7)(A) | $150,000 of 2025 FICA wages | Solo 401(k) catch-ups |
Where each plan reaches the $72,000 limit
The Solo 401(k) advantage is the employee deferral, so it is largest at modest incomes and disappears once the SEP IRA's employer contribution alone reaches $72,000. Results from the calculator for an owner under 50:
| Income | Solo 401(k) total | SEP IRA total | Difference |
|---|---|---|---|
| S corp W-2 $50,000 | $37,000 | $12,500 | $24,500 |
| S corp W-2 $120,000 | $54,500 | $30,000 | $24,500 |
| S corp W-2 $190,000 | $72,000 | $47,500 | $24,500 |
| S corp W-2 $288,000 | $72,000 | $72,000 | $0 |
| Schedule C profit $50,000 | $33,794 | $9,294 | $24,500 |
| Schedule C profit $150,000 | $52,381 | $27,881 | $24,500 |
| Schedule C profit $250,000 | $71,543 | $47,043 | $24,500 |
| Schedule C profit $400,000 | $72,000 | $72,000 | $0 |
An S corporation owner reaches the $72,000 Solo 401(k) cap at a $190,000 salary ($24,500 + 25% of $190,000) and needs $288,000 to reach it with a SEP IRA alone. The calculator shows only the contribution side; it does not model the payroll tax on a higher salary.
Catch-up contributions and the 2026 Roth rule
Catch-ups apply only to the Solo 401(k); a SEP IRA has none. At the default $120,000 salary the calculator gives $54,500 under 50, $62,500 from 50 to 59 or from 64, and $65,750 in a year the owner turns 60 through 63, with tax savings of $17,440, $20,000 and $21,040 at 32%.
From 2026, section 414(v)(7) requires catch-up contributions to be designated Roth for anyone whose FICA wages from the employer in the prior year exceeded a threshold, which Notice 2025-67 sets at $150,000 of 2025 wages. An S corporation owner who paid themselves more than that in 2025 can still make the catch-up, but as a Roth contribution with no upfront deduction, so the calculator's tax saving is overstated by the catch-up amount times the tax rate. The Roth requirement does not apply to SEP IRAs.
Frequently Asked Questions
Why does a Solo 401(k) allow higher contributions than a SEP IRA on lower W-2 salaries?
A Solo 401(k) accepts an employee deferral of up to $24,500 in 2026 on top of the employer contribution, while a SEP IRA accepts only the employer contribution of 25% of W-2 pay. An S corporation owner therefore needs a $288,000 salary to reach the $72,000 limit with a SEP IRA, against $190,000 with a Solo 401(k).
Does a Solo 401(k) trigger the IRA Pro-Rata Rule for Backdoor Roth IRAs?
No. The pro-rata calculation on Form 8606 uses traditional IRA balances, and the Form 8606 instructions define traditional IRAs to include SEP IRAs. A Solo 401(k) is an employer plan, not an IRA, so its balance is not counted. A pre-tax SEP IRA balance is counted and makes part of any Roth conversion taxable.
When is an annual IRS Form 5500-EZ required for a Solo 401(k)?
IRS Publication 560 says a one-participant plan with total assets of $250,000 or less at the end of the plan year does not have to file Form 5500-EZ for that year, and that every plan should file one for its final plan year to show all assets have been distributed.
Can I borrow from a Solo 401(k)?
Only if the plan document allows loans. When it does, the IRS limits a loan to the lesser of $50,000 or the greater of $10,000 and 50% of your vested balance. The IRS states that loans are not permitted from IRAs or IRA-based plans such as SEPs.
Can SEP IRA or Solo 401(k) contributions be Roth?
Yes, if the plan allows it. Section 601 of the SECURE 2.0 Act lets a SEP plan permit contributions to a Roth SEP IRA for tax years beginning after 2022, and a 401(k) plan can accept designated Roth deferrals. Roth contributions are not deductible, so this calculator's upfront tax saving does not apply to them.
Sources
- IRS Notice 2025-67, 2026 retirement plan limits
- IRS Publication 560, Retirement Plans for Small Business
- IRS, One-participant 401(k) plans
- IRS, Retirement plans FAQs regarding loans
- IRS, Instructions for Form 8606
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Disclaimer
Educational/scenario-analysis only; not tax, legal, or investment advice; consult a licensed CPA/advisor. Limits are from IRS Notice 2025-67 for 2026; returns are inputs, not forecasts.
Built and verified by The Breakeven Math — last reviewed September 18, 2026.