SEP IRA Contribution Calculator
The most you can put in a SEP IRA this year — a one-form retirement plan for the self-employed, funded straight from your net profit.
Your details
Rough figures are fine — you can refine later.
How we calculate this
We compute the maximum deductible SEP contribution for a sole proprietor.
1. Net SE earnings. selfEmploymentTax returns the deductible half of your SE tax; we subtract it from net profit to get your SEP "compensation."
2. Contribution. Compensation × 20% (the algebraic equivalent of 25% of compensation after the half-SE-tax adjustment), capped at the year's SEP maximum from our versioned tax-constants.json.
Assumptions: sole proprietor with no employees, no S-corp election. If you have employees, SEP rules require comparable contributions for them — out of scope here. This is a planning estimate, not tax advice — confirm with a CPA/EA.
Primary sources
- IRS Publication 560, Retirement Plans for Small Business
- IRS SEP Plan FAQs
- IRS Retirement Topics — SEP Contribution Limits
The simplest big retirement shelter for the self-employed
A SEP IRA is the "just open one" retirement plan for freelancers. There's no annual filing until it gets large, no complicated setup, and you can fund it as late as your tax deadline. In exchange for that simplicity you get a genuinely large shelter: up to 20% of your net self-employment earnings, tax-deferred, every year.
Enter your net business profit and tax year, and this calculator returns the maximum you can contribute, the share of your profit that shelters, and what it looks like funded monthly.
Why "20% of net" and not "25%"
You'll see SEP contributions described as "25% of compensation." For someone who receives a W-2, that's literal. For a sole proprietor there's no W-2 salary — your "compensation" is net profit reduced by the deductible half of your self-employment tax. Once you work the algebra through, the 25%-of-compensation rule collapses to a clean 20% of net profit. Both numbers describe the same contribution; we compute the sole-proprietor version so the figure matches what you'll actually put in.
SEP IRA vs Solo 401(k)
At the same income, a Solo 401(k) usually shelters more. The reason is structural: a Solo 401(k) lets you make an employee salary deferral — a flat dollar amount up to the annual limit — *on top of* the same 20% employer contribution a SEP allows. That employee deferral is pure extra room a SEP simply doesn't have.
So why choose a SEP? Simplicity and timing. A SEP is faster to open, has no Form 5500 filing until the balance is large, and can be established and funded after year-end. If you're deciding at tax time and want a big deduction with no fuss, the SEP is hard to beat. If you're planning ahead and want maximum shelter, run the Solo 401(k) calculator and compare.
What it does and doesn't do
A SEP contribution lowers your income tax and grows tax-deferred until retirement. It does not reduce your self-employment tax — Social Security and Medicare are figured on your net profit before any retirement contribution. And if you have employees, SEP rules generally require you to contribute the same percentage for them, which changes the math entirely; this tool assumes a one-person business.
What this is
A planning estimate for a sole proprietor with no employees and no S-corp election. Your exact deductible amount depends on your full return. Confirm the specifics — especially if you have staff or multiple businesses — with a CPA or EA before you contribute.
Common questions
How much can I contribute to a SEP IRA? + −
Up to 20% of your net self-employment earnings (net profit minus the deductible half of self-employment tax), capped at the annual SEP maximum. The "25% of compensation" you may have seen is the same figure expressed a different way — once the half-SE-tax deduction is applied, it works out to 20% of net profit for a sole proprietor.
SEP IRA or Solo 401(k) — which shelters more? + −
At the same income a Solo 401(k) usually wins, because it adds an employee salary deferral on top of the same 20% employer contribution. A SEP is simpler to open and has no annual filing until it gets large. If maximum tax deferral is the goal, compare both with our Solo 401(k) calculator.
When is the contribution deadline? + −
You can set up and fund a SEP IRA as late as your tax-filing deadline, including extensions — one of its biggest advantages. That means you can decide the amount after the year ends, once your net profit is known.
Does the contribution reduce my self-employment tax? + −
No. A SEP contribution is deducted from income for income-tax purposes, but it does not reduce self-employment (Social Security and Medicare) tax. It lowers your income-tax bill and grows tax-deferred.
Keep going
Prepared for tax year 2026. Every rate and cap on this page cites a primary IRS or SSA source. Estimates only — not tax or financial advice. — for planning purposes only, not tax, legal, or financial advice.