What is the deadline to open and fund a SEP IRA?

Your business tax-filing deadline, including extensions. For tax year 2026 a sole proprietor can establish a brand-new SEP and make the full 2026 contribution as late as October 15, 2027 with an extension (S-corps: September 15, 2027). This is the SEP's biggest practical advantage over a solo 401(k), which generally must exist by December 31 to accept employee deferrals — a SEP is the only way to create a large prior-year deduction after the year has already ended.

Does a SEP IRA have catch-up contributions?

No. SEP contributions are employer contributions, and the age-50 catch-up rules only apply to employee elective deferrals. A 55-year-old with $100,000 of sole-prop profit is capped at about $18,600 in a SEP, while the same person could put roughly $51,100 into a solo 401(k) ($24,500 deferral + $8,000 catch-up + the same ~20% employer piece). If you are 50 or older and have no employees, a solo 401(k) almost always allows more.

SEP IRA vs solo 401(k) — which lets me contribute more?

Below roughly $360,000 of compensation, the solo 401(k) always allows more because it adds a $24,500 employee deferral (plus catch-ups from age 50) on top of the same 25%/20% employer formula. At $100,000 of sole-prop profit: about $43,100 in a solo 401(k) vs about $18,600 in a SEP. The two only converge at very high income, where both hit the $72,000 §415(c) cap — and even there a solo 401(k) still wins for anyone 50+ thanks to catch-ups. The SEP wins on simplicity and its after-year-end deadline.

Do SEP IRA contributions reduce self-employment tax?

No. SEP contributions are deducted on Schedule 1 as an adjustment to income, which lowers federal income tax — but Schedule SE calculates the 15.3% self-employment tax on net earnings before any retirement deduction. The same applies to an S-corp: the corporation deducts the SEP contribution, lowering pass-through income, but FICA on your W-2 salary is unchanged. The tax-savings figure in this calculator is income tax only.

Do I have to contribute for my employees too?

Yes — this is the SEP's biggest catch. If you contribute for yourself, you must contribute the same percentage of compensation for every eligible employee: anyone 21 or older who worked for you in 3 of the last 5 years and earned at least $800 in 2026 (you may set less restrictive rules, and employees are always 100% vested immediately). Contribute 20% of your own compensation, and every eligible employee gets 20% of theirs. Owners with non-spouse employees often find a 401(k) with a safe-harbor match cheaper.

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2026 Contribution Limits

SEP IRA Calculator

Q: How much can I contribute to a SEP IRA in 2026?

The lesser of 25% of compensation or $72,000 (IRS Notice 2025-67). For an S-corp owner that means 25% of W-2 wages; for a sole proprietor or single-member LLC it works out to about 20% of net self-employment earnings (net profit minus half your SE tax), because the contribution itself reduces the compensation it is measured against. Compensation above $360,000 is ignored, so the $72,000 max is reached at exactly $360,000 of net earnings or wages. Use the calculator above for your exact number.

Calculate your maximum 2026 SEP IRA contribution — 25% of W-2 wages or about 20% of net self-employment earnings, up to $72,000. Works for sole proprietors, single-member LLCs, and S-corp owners, with a solo 401(k) comparison and your income-tax savings.

Reviewed by Slava Akulov, CEO & Co-Founder at Jupid · Last updated: August 2026

Your Details

How is your business taxed?

Schedule C filers. The SEP is based on net earnings after ½ SE tax.

Net self-employment profit: $100,000

Schedule C net profit after business expenses.

Your age at the end of 2026

SEP IRAs have no catch-up — age only changes the solo 401(k) comparison.

Filing status

Used only for the income-tax-savings estimate.

Your 2026 SEP IRA Limit

Maximum SEP contribution

$18,587

~20% of net earnings

Est. income-tax savings

$4,089

at your 22% marginal bracket

How Your Limit Is Built

Net profit (Schedule C)	$100,000
− ½ self-employment tax	−$7,065
= Net earnings (SEP compensation)	$92,935
× ~20% self-employed rate	$18,587
Maximum SEP IRA — 2026	$18,587
Solo 401(k) max (same income)	$43,087

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% of income saved

19%

2026 SEP ceiling

$72,000

Solo 401(k) would allow

+$24,500

A solo 401(k) would let you save $24,500 more

The $24,500 employee deferralstacks on top of the same employer formula. If you have no employees and the year hasn't ended, compare with our Solo 401(k) Calculator. The SEP still wins if the tax year is already over — it can be opened and funded until your filing deadline, including extensions.

Deadline: open and fund until your filing deadline

A SEP for tax year 2026 can be established and funded as late as your 2026 return's due date including extensions — up to October 15, 2027 for sole proprietors (September 15, 2027 for S-corps). It's the only self-employed plan that can create a large deduction after the year ends.

Estimates for tax year 2026 using the standard deduction and 2026 federal brackets. SEP contributions reduce income tax only — never the 15.3% SE tax or FICA. The savings estimate ignores state tax and the QBI interaction (the deduction also shrinks your 20% QBI deduction, so real savings can be somewhat lower). If you have eligible employees, the same percentage must be contributed for each of them. Not tax advice.

How the SEP IRA Math Works

Find your SEP compensation

Sole proprietors subtract half their self-employment tax from net profit to get net earnings. S-corp owners use W-2 wages. Compensation above $360,000 is ignored in 2026.

Apply the employer rate

25% of W-2 wages — or about 20% of net earnings when self-employed, because the contribution reduces the compensation it's measured against (the Pub 560 rate worksheet).

Cap at $72,000

The 2026 ceiling is $72,000 (IRS Notice 2025-67) — reached at exactly $360,000 of wages or net earnings. There are no employee deferrals and no catch-up contributions in a SEP.

Who a SEP IRA Works Best For

Any business can open one — sole proprietors, LLCs, partnerships, S-corps, and C-corps. It shines when:

The year already ended

It's the only plan you can open AND fund after December 31 — up to your filing deadline with extensions — and still deduct for the prior year.

You want zero admin

One page (Form 5305-SEP), no annual IRS filings, no payroll integration. Contributions can vary — or skip years — at your discretion.

High and irregular income

Great for windfall years: decide the contribution when you file, once you know exactly what the year looked like.

Side-hustlers with a day job

A SEP on your 1099 income doesn't share limits with your employer's 401(k) deferrals — you can max both.

The catch: contribute for yourself and you must contribute the same percentage for every eligible employee (age 21+, 3 of the last 5 years, $800+ earned in 2026).

SEP IRA vs Solo 401(k) in 2026

Same employer formula on both sides — the solo 401(k) stacks a $24,500 deferral and catch-ups on top, while the SEP wins on simplicity and deadline flexibility. Run the other side in our Solo 401(k) Calculator.

Feature	SEP IRA	Solo 401(k)
2026 contribution formula	Employer-only: 25% of W-2 wages or ~20% of net self-employment earnings	$24,500 employee deferral (up to 100% of compensation) + employer piece of 25% of W-2 wages or ~20% of net self-employment earnings
2026 maximum (under 50)	$72,000 — but you need ~$360,000 of compensation to reach it	$72,000
Catch-up contributions	None	$8,000 at age 50+; $11,250 for ages 60-63 (up to $83,250 total)
Advantage at lower incomes	At $50,000 of sole-prop profit the max is only about $9,300	Big — at $50,000 of sole-prop profit you can put away roughly $33,800 thanks to the deferral
Roth option	Allowed since SECURE 2.0 (2023), but few providers actually offer Roth SEP accounts	Yes — Roth solo 401(k) deferrals are widely available
Deadline to establish	Any time up to your tax-filing deadline, including extensions	By Dec 31 for employee deferrals (SECURE 2.0 lets a sole proprietor's first-year plan be adopted by the filing deadline, without extensions); employer piece can be added until the extended filing deadline
Deadline to fund for 2026	Filing deadline + extensions (as late as Oct 15, 2027)	Deferrals through payroll/year-end elections; employer contributions by the filing deadline + extensions
Loans allowed	No	Yes — up to 50% of the balance, max $50,000
IRS paperwork	None — no annual filing	Form 5500-EZ each year once plan assets exceed $250,000
Employees	Works with employees, but you must contribute the same percentage for every eligible employee	Only for owner (+ spouse); hiring a full-time non-spouse employee ends eligibility

What This Calculator Includes

The Pub 560 worksheet

Net profit → SE tax (12.4% Social Security up to $184,500 + 2.9% Medicare) → ½-SE deduction → the ~20% self-employed rate, computed exactly.

Verified 2026 limits

The $72,000 contribution ceiling, $360,000 compensation cap, and $800 minimum-compensation threshold from IRS Notice 2025-67.

Entity-aware results

Sole prop / single-member LLC vs S-corp W-2 wages — each with the correct rate and no SE-tax adjustment where none applies.

Solo 401(k) side-by-side

Your solo 401(k) maximum at the same income and age, so you see exactly what the SEP's simplicity costs you.

Why Use This Calculator?

The 25% number is a trap

Self-employed people who multiply profit by 25% over-contribute — the real rate is ~20% of net earnings after the ½-SE-tax deduction. Excess SEP contributions trigger a 6% excise tax per year until withdrawn.

Decide SEP vs solo 401(k) with numbers

The right answer depends on your income, your age, and whether the year is over. This calculator shows both maximums side by side instead of a generic "it depends."

Plan the actual tax payoff

See the federal income-tax savings at 2026 brackets before you move the money — and know upfront that SE tax stays exactly the same.

Frequently Asked Questions

SEP IRA contribution limits for 2026

A Simplified Employee Pension (SEP) IRA takes employer-only contributions: for 2026 the maximum is the lesser of 25% of compensation or $72,000 (IRS Notice 2025-67), with compensation capped at $360,000. There are no employee deferrals and no catch-up contributions — which is exactly why the SEP maximum rises linearly with income while a solo 401(k) jumps ahead by $24,500 from the first dollar.

Income (sole prop net profit)	SEP IRA max	Solo 401(k) max (under 50)
$50,000	$9,294	$33,794
$100,000	$18,587	$43,087
$250,000	$47,043	$71,543
$500,000	$72,000 (cap)	$72,000 (cap)

For the self-employed the 25% rate effectively becomes ~20% of net earnings(net profit minus half your SE tax), because the contribution reduces its own base — the "rate worksheet" in IRS Publication 560. S-corp owners skip that adjustment and use a flat 25% of W-2 wages.

The SEP's superpower: a deduction after the year ends

Unlike a 401(k), a SEP can be established and funded up to your filing deadline, including extensions. File an extension and a sole proprietor can open a brand-new SEP in October 2027 and still deduct the full contribution on their 2026 return. That makes the SEP the standard "rescue" move when a big tax bill surprises you at filing time — pair it with our 1099 Tax Calculator to see the bill it offsets.

Two caveats. First, contributions are discretionary but uniform: any percentage you give yourself must also go to every eligible employee (age 21+, employed in 3 of the last 5 years, at least $800 of 2026 compensation), all immediately 100% vested. Second, SEP dollars are traditional pre-tax IRA money — they count against you in backdoor-Roth pro-rata math, one more reason high earners often prefer the solo 401(k).

Related Calculators

Solo 401(k) Calculator 1099 Tax Calculator Self-Employment Tax Calculator Quarterly Tax Calculator S Corp Tax Calculator Roth IRA Calculator Retirement Plan Deductions for the Self-Employed Form 5498: IRA Contribution Reporting

Official References

Sources used for the 2026 limits and rules in this calculator (verified August 2026):

IRS IR-2025-111 / Notice 2025-67: 2026 Retirement Plan Limits
The 2026 cost-of-living adjustments behind the $72,000 contribution cap and $360,000 compensation limit.
IRS Notice 2025-67 (full text, PDF)
Official 2026 limits, including the $800 SEP minimum-compensation threshold.
IRS: Simplified Employee Pension Plan (SEP)
How SEPs work, who must be covered, and the contribution rules.
IRS: SEP FAQs
Confirms a SEP can be set up and funded until the filing deadline, including extensions.
IRS: Calculating Your Own Retirement Plan Contribution
The self-employed rate reduction — why 25% becomes ~20% of net earnings.
IRS Publication 560: Retirement Plans for Small Business
The Deduction Worksheet for Self-Employed and complete SEP rules.

This calculator estimates 2026 contribution limits and federal income-tax savings using the standard deduction. It does not model employees' required contributions, QBI interactions, or employer aggregation across multiple businesses. Not tax or investment advice — confirm your limit with a tax professional before contributing.

Related Tools

Solo 401(k) Calculator

Usually the bigger limit — deferral, employer piece, and catch-ups.

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Self-Employment Tax Calculator

The 15.3% SE tax that feeds this calculator's net-earnings step.

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Quarterly Tax Calculator

Estimate 2026 quarterly payments after your SEP deduction.

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S Corp Tax Calculator

See how an S election changes payroll tax — and your SEP compensation.

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