Solo 401(k) vs SEP-IRA Calculator (2026 Head-to-Head)

The two plans are usually presented as rivals with different formulas. They are not. For a sole proprietor they share one formula and differ by one component.

Both start from Schedule C net profit, subtract the deductible half of self-employment tax to reach net earnings from self-employment under IRC section 401(c)(2), and apply the same 20% reduced rate to it. That produces the same employer contribution in both plans, to the cent.

The Solo 401(k) then adds something a SEP-IRA has no equivalent of: an employee elective deferral of up to $24,500 for 2026, plus catch-up from age 50.

That single fact determines the whole comparison, and it determines it in a direction most write-ups state backwards. The Solo advantage is largest at low income, where the 20% employer piece is small and the flat deferral is enormous relative to it, and it converges to zero at $360,000 of net earnings from self-employment, where the employer 20% alone fills the section 415(c) limit and there is no room left for the deferral to occupy.

At $25,000 of net profit the Solo permits 400% more than a SEP. At $432,535 of net earnings they are identical.

Step by step:

Step 1 -- Compute self-employment tax. Schedule C net profit times 92.35%, times 15.3% up to the Social Security wage base, with Medicare continuing above it.

Step 2 -- Take half of it as the section 164(f) deduction.

Step 3 -- Subtract that from net profit to get net earnings from self-employment. This is the self-employed equivalent of a W-2 employee's compensation, and it is the base both plans use.

Step 4 -- Convert the stated 25% plan rate to the self-employed reduced rate. Because the contribution is a percentage of earnings after the contribution is subtracted, the IRS worksheet resolves the circularity as r ÷ (1 + r). At 25% that is exactly 20%. "20% of net self-employment earnings" and "25% of compensation" are the same worksheet expressed two ways, not two competing methods.

Step 5 -- Compute the employer contribution: 20% of net earnings. This is step 5 for both plans. The SEP-IRA stops here, capped at the 2026 dollar limit of $72,000.

Step 6 -- Determine the Solo 401(k) catch-up tier. None below 50, $8,000 from 50, and $11,250 in the SECURE 2.0 band for ages 60 to 63, which replaces rather than stacks with the standard catch-up.

Step 7 -- Size the employee deferral. The smallest of what you asked for, the statutory limit of $24,500 plus catch-up, and your actual net earnings from self-employment.

Step 8 -- Fit the employer piece into the remaining section 415(c) room. The combined cap is $72,000 for 2026, and the non-catch-up deferral consumes part of it. Catch-up contributions sit outside the cap.

Step 9 -- Cap the total at net earnings. You cannot contribute more than you earned.

Step 10 -- Difference the two plans, and find the convergence point. The employer 20% reaches the $72,000 cap when net earnings reach $72,000 ÷ 0.20 = $360,000. Above that, the plans are level except for catch-up.

Using the defaults: $90,000 of Schedule C net profit, age 45, a requested deferral of $24,500, no employees, a 24% combined marginal rate.

Step 1 -- Compute self-employment tax. $90,000 × 92.35% = $83,115.00 of net earnings subject to SECA, taxed at 15.3%. $83,115.00 × 15.3% = $12,716.60

Step 2 -- Take the deductible half. $12,716.60 ÷ 2 = $6,358.30

Step 3 -- Compute net earnings from self-employment. $90,000.00 − $6,358.30 = $83,641.70

Step 4 -- Compute the employer contribution at the reduced rate. 20% × $83,641.70 = $16,728.34

Step 5 -- That is the entire SEP-IRA contribution. $16,728.34, well below the $72,000 dollar cap. SEP-IRA total: $16,728.34

Step 6 -- Determine the catch-up tier. Age 45 is below 50, so the tier is none and the catch-up is $0.00. The statutory deferral limit is $24,500.00.

Step 7 -- Size the employee deferral. min($24,500 requested, $24,500 statutory, $83,641.70 net earnings) = $24,500.00

Step 8 -- Check the section 415(c) room. $72,000 − $24,500 = $47,500 of room remains for the employer piece, and $16,728.34 fits inside it comfortably. The cap does not bind.

Step 9 -- Total the Solo 401(k). $24,500.00 + $16,728.34 = $41,228.34

Step 10 -- Difference the two plans. $41,228.34 − $16,728.34 = $24,500.00

Step 11 -- Express it as a percentage. $24,500.00 ÷ $16,728.34 = 146.46% more room

Step 12 -- Value the extra room at the marginal rate. $24,500.00 × 24% = $5,880.00 of tax deferred this year

Step 13 -- Find where the advantage disappears. $72,000 ÷ 0.20 = $360,000 of net earnings from self-employment. At $83,641.70 you are far below it, so the deferral is pure extra room.

The shape across income, from the engine's own sweep at these settings:

Read the last column. In dollars the advantage is flat at the full deferral through the middle of the range and then collapses. As a percentage of what a SEP would allow, it is overwhelming at the bottom and gone at the top. That is the opposite of the usual claim that a Solo 401(k) is the high-earner's plan.

• Businesses with common-law employees. This is the largest limitation. A "solo" 401(k) stops being solo the moment there is an eligible employee other than a spouse, and it picks up nondiscrimination testing, an employer contribution obligation and a full Form 5500. A SEP must give every eligible employee the same percentage of compensation you give yourself, under section 408(k)(3). Neither figure here is reliable for a business with staff; the calculator flags the case rather than modelling it per employee.
• Roth deferrals in a Solo 401(k), and the SECURE 2.0 requirement that catch-up contributions be Roth for higher earners.
• Plan loans, available in a Solo 401(k) and never in a SEP.
• S corporation owners paying themselves W-2 wages. The reduced-rate worksheet applies to sole proprietors and partners. A W-2 owner-employee uses 25% of compensation directly, on a different base.
• The actual tax saving. The marginal rate input is your own figure, not verified against any table, and it is used only to put a dollar value on the extra room.
• State tax, and states that do not conform to federal retirement plan treatment.
• Administration. The SEP has no Form 5500 and can be opened and funded after year end, up to the extended filing deadline. A Solo 401(k) generally requires the plan to exist before year end, and files Form 5500-EZ once assets pass the threshold.
• Multiple plans and controlled groups, where the section 415(c) limit and the deferral limit aggregate across employers.

• Applying 25% to raw Schedule C profit. This is the single most common error in self-employed retirement math, and it overstates the contribution twice: it skips the SE-tax deduction and it uses the stated rate rather than the reduced rate. On these defaults it would give $22,500 instead of $16,728.34.
• Believing the two plans have different employer formulas. They do not. Both give $16,728.34 here.
• Believing the Solo advantage grows with income. It shrinks. At $25,000 of net profit it is 400%; at $432,535 of net earnings it is zero.
• Deferring more than you earned. The deferral is capped at net earnings from self-employment, which is why the $25,000 row above contributes $23,233.80 rather than the full $24,500 plus an employer piece.
• Opening a SEP because it is easier and then hiring someone. The section 408(k)(3) rule means you must fund every eligible employee at your own percentage.
• Forgetting catch-up is the only Solo advantage left at high income. A SEP-IRA has no catch-up at any age.
• Assuming the section 415(c) cap includes catch-up. It does not; catch-up sits outside it.

• IRS Notice 2025-67, https://www.irs.gov/pub/irs-drop/n-25-67.pdf -- the 2026 retirement plan limits, including the $24,500 elective deferral limit and the SECURE 2.0 catch-up figures. Fetched and read 2026-08-30.
• IRS, "401(k) limit increases to $24,500 for 2026" (irs.gov newsroom) -- the 2026 elective deferral limit.
• IRS section 415(c) COLA table -- the $72,000 overall defined contribution limit for 2026, which is also the SEP-IRA dollar cap.
• IRS Publication 560, chapter 5, "Table and Worksheets for the Self-Employed" -- the rate table and the reduced-rate calculation r ÷ (1 + r), and the requirement to reduce net profit by the deductible half of self-employment tax first.
• IRS, "Self-employed individuals: Calculating your own retirement plan contribution and deduction" -- the worked example the primitive is tested against: net profit $100,000, SE tax $14,130, half-SE-tax deduction $7,065, net earnings $92,935, reduced rate for a 10% plan of 9.0909%, contribution $8,449.
• IRC section 401(c)(2) -- the definition of net earnings from self-employment.
• IRC section 164(f) -- the deduction for one-half of self-employment tax.
• IRC section 408(k)(3) -- the SEP nondiscrimination rule requiring the same contribution percentage for every eligible employee.
• IRC section 401(a)(17) -- the $360,000 annual compensation limit for 2026.