SEP-IRA Calculator
Calculate your maximum SEP-IRA contribution, which is 20 percent of net self-employment income up to the annual limit.
Want to understand the concept, not just the number? Read The Self-Employed Retirement Guide .
How it's calculated
A SEP-IRA is the simplest retirement plan for a self-employed person. There is one contribution, made by you as the employer, worth up to 25 percent of compensation. For a sole proprietor with no W-2 wage, that translates to 20 percent of your net self-employment income, and there is very little paperwork to set it up or maintain.
Net self-employment income is your net profit minus the deductible half of your self-employment tax. Take the default. A $100,000 net profit owes about $14,130 in self-employment tax, and half of that, $7,065, comes off first, leaving $92,935.22 of net self-employment income. Twenty percent of that is $18,587.04, which is your maximum SEP-IRA contribution for the year. The amount is capped at the overall $72,000 limit for 2026, which only bites at much higher incomes.
The SEP-IRA trades a bit of contribution room for simplicity. Unlike a Solo 401(k), it has no employee salary deferral, so at the same income it usually lets you save less. Its appeal is how easy it is to open and run, with no annual filing while balances are modest. If you want to contribute the most possible, compare it against the Solo 401(k), which adds the flat employee deferral on top of this same 20 percent employer share.
Assumptions
- For a sole proprietor, the SEP-IRA contribution is 20 percent of net self-employment income, which is net profit minus the deductible half of self-employment tax.
- The dollar amount is capped at the section 415(c) limit for the year, which is 72,000 for 2026, from the versioned tax data.
Last updated: 2026-08-08 · Tax year 2026
These assumptions follow our general methodology.
Frequently asked questions
How much can I contribute to a SEP-IRA?
As a sole proprietor, up to 20 percent of your net self-employment income, which is your net profit minus the deductible half of self-employment tax. The dollar amount is capped at the annual limit, $72,000 for 2026. Businesses that pay W-2 wages use 25 percent of compensation instead.
Why 20 percent instead of 25 percent?
The 25 percent limit applies to W-2 compensation. A sole proprietor has none, so once the calculation adjusts for the contribution itself and the self-employment tax deduction, the effective rate on net self-employment income is 20 percent. Both routes reach the same dollar figure.
SEP-IRA or Solo 401(k), which should I choose?
A Solo 401(k) usually allows a larger contribution at the same income, since it adds an employee salary deferral on top of the 20 percent employer share. A SEP-IRA is simpler to run. If maximum savings matter most, the Solo 401(k) tends to win, so compare both.
Can I contribute to a SEP-IRA and a Roth IRA in the same year?
Yes. A SEP-IRA does not affect your ability to contribute to a Roth IRA, though the Roth has its own income limits. Many self-employed savers use a SEP-IRA or Solo 401(k) for the bulk and a Roth IRA for tax-free growth on the side.