Calculate the maximum SEP IRA contribution for a self-employed individual using current federal limits and the self-employed deduction worksheet approach.
The SEP IRA Contribution Calculator estimates the maximum SEP IRA contribution for a self-employed individual. For sole proprietors and single-member LLC owners, the calculation is not simply 25% of profit. You first reduce net earnings by the deductible half of self-employment tax, and the effective self-employed contribution rate becomes 20% of those adjusted earnings.
SEP IRAs remain popular because they have high contribution limits and low administrative overhead compared with a full 401(k) plan. For 2026, the maximum SEP contribution is $72,000, subject to the compensation-based formula.
Enter net self-employment income to see the maximum SEP contribution, the effective contribution rate, and a rough comparison to IRA, SIMPLE IRA, and Solo 401(k) alternatives.
This page handles the self-employed math that people often get wrong. It shows the deductible half of self-employment tax, the adjusted earnings used in the formula, and the resulting SEP limit so you can plan contributions without overshooting the allowed amount.
Step 1: SE Tax Base = Net SE Income × 0.9235 Step 2: Deductible Half of SE Tax = (Social Security tax up to the annual wage base + Medicare tax on all SE tax base) ÷ 2 Step 3: Adjusted Net Earnings = Net SE Income − Deductible Half of SE Tax Step 4: SEP Contribution = min(Adjusted Net Earnings × 20%, $72,000)
Result: Max SEP contribution: $37,177 (effective rate: 18.59%)
With $200,000 of net self-employment income, the SE tax base is reduced to 92.35% of profit and the deductible half of self-employment tax is subtracted first. That leaves about $185,883 of adjusted earnings. Applying the self-employed SEP rate of 20% produces a maximum contribution of about $37,177.
SEP IRAs are still one of the simplest high-limit retirement plans for self-employed people. There is little administrative overhead, no annual Form 5500 requirement for a solo SEP, and contributions can usually be made up to the tax-filing deadline including extensions.
For self-employed owners, the plan-level 25% contribution rate has to be converted into the self-employed equivalent rate after backing out the deductible half of self-employment tax. That is why the effective formula lands at 20% of adjusted net earnings instead of a straight 25% of Schedule C profit.
At many income levels, a Solo 401(k) can allow a larger total because it adds an employee deferral before the employer-style contribution is calculated. The SEP remains attractive when simplicity is more important than squeezing out the last possible dollar of annual shelter.
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This page calculates self-employment tax on 92.35% of net self-employment income, caps the Social Security portion at the 2026 contribution and benefit base, adds Medicare tax on the full self-employment tax base, and then subtracts half of that self-employment tax to get adjusted net earnings. It applies the self-employed SEP rate of 20% to those adjusted earnings and caps the result at the 2026 SEP dollar limit of $72,000.
The comparison rows for Solo 401(k), SIMPLE IRA, and regular IRAs are rough current-year planning comparisons, not full plan-design analyses. The page also does not model Additional Medicare Tax, other wages, multiple businesses, or employee-inclusion rules in detail.
For 2026, the maximum SEP IRA contribution is $72,000. For self-employed individuals, the contribution is not a flat 25% of Schedule C profit. You first reduce earnings by the deductible half of self-employment tax, then apply the self-employed equivalent rate of 20%.
The 25% plan rate is applied at the employer-plan level, but a self-employed owner first has to reduce net earnings by the deductible half of self-employment tax. The IRS self-employed worksheets convert that into a 20% effective rate on adjusted net earnings.
A Solo 401(k) can allow higher contributions at many income levels because it combines an employee deferral with an employer-style contribution. For 2026, the standard employee deferral limit is $24,500 before catch-up contributions. SEP IRAs are simpler to administer, but they do not include that separate employee deferral piece.
Yes, but the contribution limits are separate only in the sense that the SEP contribution does not replace the regular IRA limit. Deductibility and other tax rules still depend on your overall tax situation.
SEP contributions can usually be made up to the tax-filing deadline including extensions. That flexibility is one reason the plan remains popular with self-employed owners.
No. It is a planning worksheet. It does not fully model Additional Medicare Tax, multiple jobs, multiple businesses, or every compensation definition issue that can matter on a real return.