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Solo 401(k) vs SEP-IRA Calculator

Compare the two retirement plans available to self-employed people and solo S-corp owners. See which lets you contribute more based on your net self-employment income, W2 wage, and age.

🟢 Updated April 2026👤 Reviewed by MoneyMath Editorial⚡ Runs in your browser · inputs never leave your device
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Solo 401(k) max
$47,500.00
$23,500.00 more than SEP-IRA
Solo 401(k) breakdown
Employee deferral$23,500.00
Employer profit-sharing$24,000.00
Total$47,500.00
SEP-IRA breakdown
Employer contribution only$24,000.00

2026 annual limit: $70,000 (+$7,500 catch-up). Both plans share this cap across all your retirement accounts.

Solo 401(k) vs SEP-IRA — which should I use?

For most self-employed people, Solo 401(k) wins because it includes a flat $23,500 employee deferral on top of the employer contribution. A SEP-IRA only has the employer piece — you have to earn a lot more income before it catches up.

When Solo 401(k) wins

  • Net SE income under about $230K (the crossover where SEP's 25% = Solo 401(k)'s deferral + 20%)
  • You want a Roth option — Solo 401(k) allows Roth, SEP-IRA does not
  • You want the ability to take a loan against it (Solo 401(k) allows up to $50K loan)
  • You're 50+ and want the $7,500 catch-up
  • You want backdoor Roth IRA flexibility (SEP-IRA interferes with the pro-rata rule, Solo 401(k) doesn't)

When SEP-IRA wins

  • Simplicity — SEP is a one-form IRA, no annual Form 5500-EZ filing
  • You have employees other than spouse (Solo 401(k) requires you be the only employee; SEP allows employees but you must contribute proportionally)
  • Very high income ($300K+) — at that level SEP's 25% matches or beats Solo 401(k), without the admin
  • You'll contribute after year-end — SEP allows contributions up to the extended tax deadline (Oct 15); Solo 401(k) must be established by Dec 31 (first year)

Contribution math — sole proprietor

For a sole prop / single-member LLC, the "compensation" that drives the employer contribution is:

net SE income − (1/2 × SE tax)

Then the employer contribution is 25% of that, which on a net basis works out to roughly 20% of net SE income (because the 25% is applied after the "gross-up").

Contribution math — S-Corp owner

For S-Corp owners, it's cleaner: the employer contribution is a flat 25% of your W2 salary (not including K-1 distributions). Employee deferral comes out of W2 wages too.

Trap: the $66K / $69K / $70K shared cap

Both plans cap total annual contributions at $70,000 (2026 figure, up from $69K in 2024). Catch-up is an additional $7,500 for age 50+. If you participate in a W2 401(k) at another job, the employee deferral limit ($23,500) is shared across all plans.

Frequently Asked Questions

Can I have both a Solo 401(k) and a SEP-IRA?

Technically yes, but contributions share the $70K annual limit. Usually no reason — pick one. Using both adds admin with no tax benefit.

Does a Roth Solo 401(k) make sense?

If you expect to be in a higher tax bracket at retirement, yes. Also valuable for leaving tax-free wealth to heirs. After 2023 SECURE 2.0, Roth Solo 401(k)s skip required minimum distributions — huge for estate planning.

What if I have a side gig but also a W2 job with a 401(k)?

The $23,500 employee deferral is shared between them. But you can still get the employer-side Solo 401(k) contribution (up to $46,500 more at 25% of SE comp) on top of your W2 401(k).

When do I have to set up the plan?

Solo 401(k): open by Dec 31 of the tax year for first-time contributions (SECURE 2.0 relaxed this — employer contributions can be added up to tax deadline). SEP-IRA: open anytime up to the extended filing deadline (Oct 15).

Do Solo 401(k)s require a Form 5500-EZ filing?

Only once plan assets exceed $250K. Below that, no filing required. Above, one-page form due July 31 each year.

Can my spouse contribute to my Solo 401(k)?

Yes, if your spouse earns income from the same business. They get their own $23,500 employee deferral + employer contribution. Doubles household contribution capacity.