Free SEP IRA Calculator (2026)

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A SEP IRA (Simplified Employee Pension) is one of the most powerful retirement accounts available to self-employed workers and small business owners. For 2026, you can contribute up to 25% of net self-employment income — with a maximum contribution of $69,000. Use our free SEP IRA calculator to find your exact maximum contribution, see your tax savings, and compare how different income levels affect your contribution limit.

free sep ira calculator

Free SEP IRA Calculator

Calculate your 2026 maximum SEP IRA contribution and tax savings


Enter your net profit before the SE tax deduction

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Note: SEP IRAs do not have a catch-up contribution option (unlike 401k). Age affects your tax bracket only.


How This Free SEP IRA Calculator Works

Step 1: Select Your Employment Type

The SEP IRA contribution formula differs based on how your business is structured. Self-employed individuals and sole proprietors use a modified calculation based on net Schedule C income, while S-corp and C-corp owners use 25% of W-2 wages paid by the business. This free SEP IRA calculator handles both structures automatically.

Step 2: Enter Your Net Income or W-2 Compensation

For self-employed filers, enter your net profit from your Schedule C — this is your gross business income minus allowable business expenses. The calculator automatically applies the IRS-required adjustment for the self-employment tax deduction before computing your contribution limit.

Step 3: Add Filing Status and Other Income

Your filing status and total household income determine your federal tax bracket, which the free SEP IRA calculator uses to estimate how much in federal income taxes your contribution will save you this year.

Step 4: Include Employees (If Applicable)

If you have eligible employees, the IRS requires you to contribute the same percentage of compensation to each eligible employee’s SEP IRA as you contribute for yourself. The calculator shows your total employer contribution obligation so there are no surprises.

Step 5: Review Your Results

Your results include your maximum allowable contribution, estimated federal tax savings, a monthly savings schedule, and a 10-year compound growth projection so you can see the long-term power of consistent SEP IRA contributions.

Frequently Asked Questions

What is the 2026 SEP IRA contribution limit?

For 2026, the maximum SEP IRA contribution is the lesser of 25% of compensation or $69,000. For self-employed individuals, the effective rate works out to approximately 18.587% of net self-employment income after the SE tax deduction adjustment. Use our free SEP IRA calculator above to find your exact number.

How is the self-employed SEP IRA limit calculated?

The IRS formula for self-employed filers involves three steps: (1) Multiply your net SE income by 92.35% to find net earnings subject to SE tax. (2) Multiply that by 50% to find the deductible SE tax. (3) Subtract the SE tax deduction from net income, then multiply by 20% (which equals 25% of the adjusted amount). The result is your maximum SEP IRA contribution as a self-employed person.

Is a SEP IRA better than a Solo 401k?

It depends on your situation. A SEP IRA is simpler to open and maintain with no annual filing requirement (no Form 5500). A Solo 401k allows higher contributions at lower income levels because it includes an employee contribution component ($23,500 in 2026), and it allows catch-up contributions for those 50+. At higher income levels (roughly $100k+ in net SE income), both plans reach similar maximums. Use our free Solo 401k calculator to compare side-by-side.

Do SEP IRAs have catch-up contributions?

No. Unlike Traditional IRAs and 401k plans, SEP IRAs do not allow catch-up contributions for participants age 50 and older. Your limit is strictly 25% of compensation or $69,000, whichever is less — regardless of age.

Can I contribute to both a SEP IRA and a Traditional IRA?

Yes, you can contribute to both in the same year. However, if you (or your spouse) are covered by a workplace retirement plan, your Traditional IRA deduction may be phased out based on your modified adjusted gross income. Your SEP IRA contribution does not affect your Traditional IRA contribution limit of $7,000 (2026). The free SEP IRA calculator focuses on the SEP portion only.

What is the deadline to contribute to a SEP IRA?

One of the biggest advantages of a SEP IRA is its late contribution deadline. You can make 2026 SEP IRA contributions all the way until your tax filing deadline, including extensions. For most self-employed filers, this means contributions can be made as late as October 15, 2027 if you file for an extension.

Must I contribute every year?

No. SEP IRA contributions are completely discretionary. You can contribute the maximum in a good income year and contribute nothing in a lean year. This flexibility makes SEP IRAs especially attractive for self-employed workers with variable income.

Are SEP IRA contributions tax deductible?

Yes. SEP IRA contributions are fully deductible as an above-the-line deduction on Schedule 1, reducing your adjusted gross income dollar-for-dollar. This means the tax savings happen immediately — you do not need to itemize deductions to benefit from your free SEP IRA calculator results.

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Understanding SEP IRAs for Self-Employed Workers and Small Business Owners

The SEP IRA (Simplified Employee Pension Individual Retirement Account) was created by Congress specifically to give self-employed workers and small business owners access to retirement savings comparable to large corporate pension plans. Unlike traditional pension plans, the SEP IRA requires no complex actuarial calculations, no annual government filings for most plans, and no mandatory annual contributions — making it one of the most accessible and flexible retirement tools available to independent workers.

For 2026, the SEP IRA allows contributions of up to 25% of compensation with a hard cap of $69,000 per participant. This contribution limit dwarfs the $7,000 limit for Traditional and Roth IRAs, which is why the SEP IRA is the primary retirement vehicle for high-earning self-employed individuals. If you have not yet run the numbers, try our free SEP IRA calculator above to see exactly how much you can contribute.

How the Self-Employed SEP IRA Formula Works

The IRS formula for self-employed individuals is intentionally circular, which is why many people rely on a free SEP IRA calculator to get the right number. Here is how it works step by step:

Step 1: Start with your net Schedule C profit (business income minus expenses).
Step 2: Multiply by 92.35% to find net earnings subject to self-employment tax.
Step 3: Multiply that result by 15.3% to find your total SE tax, then take 50% (the deductible half).
Step 4: Subtract the SE tax deduction from your net profit.
Step 5: Multiply the result by 20% (which is mathematically equivalent to 25% of the adjusted amount).
Step 6: Cap the result at $69,000.

For a self-employed person with $100,000 in net profit, this formula produces a maximum SEP IRA contribution of approximately $18,587 — not the $25,000 you might expect from “25% of $100,000.” The adjustment accounts for the fact that you are effectively contributing on behalf of yourself as both employee and employer.

SEP IRA vs. Solo 401k: Which Is Better?

Both plans are excellent choices for self-employed individuals, but they have meaningful differences. The SEP IRA wins on simplicity — you can open one at most major brokerages in minutes, there are no annual IRS filings required for most account holders, and contributions can be made as late as your tax filing deadline including extensions. The Solo 401k wins on contribution flexibility at lower income levels, because it allows a separate employee contribution (up to $23,500 in 2026) on top of the employer contribution, allowing you to reach higher contribution levels at lower income thresholds. The Solo 401k also allows Roth contributions and loans, while the SEP IRA does not. For income below roughly $150,000 in net self-employment income, the Solo 401k typically allows larger total contributions. For a detailed comparison, the IRS retirement plans for self-employed people page provides official guidance on choosing between plan types.

The Employer Contribution Rule for Business Owners with Employees

One critical rule that catches many small business owners off guard: if you establish a SEP IRA for yourself, you must offer and fund it for all eligible employees at the same contribution percentage. An eligible employee is one who is at least 21 years old, has worked for you in at least 3 of the last 5 years, and earned at least $750 in 2026. You cannot exclude employees to keep costs down. If you contribute 15% of your own compensation to your SEP IRA, you must contribute 15% of each eligible employee’s compensation as well. This obligation can significantly increase the total cost of the plan, which is why sole proprietors with no employees have a particularly strong advantage with the SEP IRA structure.

Tax Advantages of SEP IRA Contributions

SEP IRA contributions reduce your taxable income dollar-for-dollar. For a self-employed person in the 24% federal tax bracket who contributes $18,000 to a SEP IRA, the immediate federal tax savings equals $4,320. In states with income tax, the savings are even greater. Unlike many deductions, the SEP IRA deduction is an above-the-line deduction — meaning it reduces your adjusted gross income regardless of whether you itemize or take the standard deduction. This makes it one of the most valuable tax reduction strategies available to self-employed workers, and exactly why running a free SEP IRA calculator before tax season ends is essential.

Over time, the compound growth inside a SEP IRA — where contributions grow tax-deferred until withdrawal — can produce account values that dwarf the original contributions. A self-employed person who consistently maximizes their SEP IRA contribution over a 20-year career can accumulate over $1 million in retirement assets from this single account alone. For additional guidance on SEP IRA rules and limits, see the IRS Publication 560 — Retirement Plans for Small Business, which covers SEP, SIMPLE, and qualified plan rules in detail.

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