Solo 401(k) vs SEP IRA contribution calculator
How much a one-person business can put away for 2026 or 2027, in a Solo 401(k) and in a SEP IRA, side by side.
- Employee deferral
- ·
- Employer contribution
- ·
- Catch-up
- ·
- Most you can put in a SEP IRA
- ·
- Solo 401(k) advantage
- ·
Point at any line to see what it means.
What this is actually calculating.
A Solo 401(k) lets you contribute in two roles. As the employee you defer up to the annual limit, plus a catch-up from age 50. As the employer you add up to 25% of your W-2 pay from an S corporation, or about 20% of a sole proprietor's net profit after the deduction for half of self-employment tax. The two together are capped by the annual addition limit; catch-ups sit on top.
A SEP IRA has only the employer role, at the same 20% or 25%, under the same cap. That is why the Solo 401(k) comes out ahead at moderate incomes: the employee deferral is money a SEP cannot accept. At high incomes the employer share alone can fill the cap, and the two converge.
The parts that decide the answer.
Sole proprietor or S corporation
A sole proprietor's contribution, including a single-member LLC taxed as one, is figured on net profit less half of self-employment tax, which is why the employer share is about 20% rather than 25%. An S corporation owner's is figured on the W-2 salary only; distributions do not count.
The cap
Deferrals plus employer contributions cannot exceed the annual addition limit, and only pay up to the compensation limit counts. Catch-ups are added on top of the cap.
Catch-ups and the Roth rule
From 50 you can add a catch-up, and a larger one in the years you turn 60 to 63. If last year's W-2 wages from your business were above the threshold, the catch-up must go in as Roth. A sole proprietor has no W-2 wages from the business, so the rule does not apply.
Deferrals made elsewhere
The employee deferral limit is per person, across every 401(k) and 403(b). Anything already deferred at another job this year comes off what your Solo 401(k) can take.
Before you rely on it.
Why is the sole proprietor rate 20% and not 25%?
The 25% applies to compensation after the contribution itself is taken out, which for a sole proprietor works out to 20% of net profit less half of self-employment tax.
Can I open a SEP IRA after the year ends?
Yes. A SEP can be opened and funded up to your tax filing deadline, including extensions. A Solo 401(k) generally has to exist by December 31 for employee deferrals; the exception is a brand-new plan for a sole proprietor with no employees, which can be opened and receive first-year deferrals up to the filing deadline, without extensions.
Does this work if I have employees?
No. A Solo 401(k) is only for an owner, and a spouse, with no other eligible employees, and a SEP must cover eligible employees at the same rate. The small business plan calculator compares the options when you have staff.
Get your results as a PDF
A branded summary of the figures you entered, what they mean, and the assumptions behind them.
Downloaded. A copy is on its way to your inbox.
A number is a starting point, not a plan. The next step is a conversation about what it means for yours.
Book a Free CallA complimentary 30-minute call. No cost, no obligation, and nothing to prepare.
Keep Reading
From the blog
The 2027 401(k) and IRA Limits: What Changed and What to Do Now
The IRS announced the 2027 retirement plan limits on November 12, 2026. The 401(k) limit rises to $25,500, the total cap to $75,000, and the IRA limit stays at $7,500. Here is every number that changed, what it means for employees and business owners, and what to do before January.
Read MoreYour Stack of Finance Apps Is a Growing Fraud Surface
Every linked finance app adds a login someone can take over, so a growing stack widens your fraud and data exposure faster than any single app improves your finances.
Read MoreThe Backdoor Roth IRA in 2026: A Step-by-Step Guide
If your 2026 income is too high for a direct Roth IRA contribution, the backdoor Roth lets you get the same $7,500 ($8,600 at age 50 or older) into a Roth. Here is how to do it step by step, how to report it, and the mistakes that make it taxable.
Read More