CCal
United States

Solo 401(k) / SEP-IRA Calculator

Legal basis: IRC §404 and §415(c) (self-employed retirement plan contributions); IRC §1402 (self-employment tax) · checked 2026-10-04 · Rates and limits change — verify the current figures.

Self-employed people get the largest retirement contribution room in the tax code, but the formula is the least intuitive. A one-participant 401(k), usually called a solo 401(k), lets you contribute as both the employee and the employer. As the employee you defer a fixed elective amount set by IRC Section 402(g), plus a catch-up at 50+. As the employer you make a profit-sharing contribution governed by Sections 404 and 415(c), and everything together is capped by the annual additions limit.

The employer side is where the arithmetic surprises people. The statute allows 25 percent of compensation, but for a sole proprietor or single-member LLC the IRS defines compensation as net profit minus half the self-employment tax, which works out to roughly 20 percent of net profit. Half your SE tax is deductible, so the base shrinks first and the percentage is applied to the smaller number. The calculator derives the SE tax on 92.35 percent of profit, takes half of it out, and applies the employer percentage to what remains.

The alternative is the SEP-IRA. It is dramatically simpler to set up and maintain - a one-page form and no annual filings for most small balances - but it has no employee-deferral side at all, so the ceiling is just the roughly-20-percent employer contribution. For a high-earning self-employed person, the solo 401(k)'s elective deferrals usually add far more room; for a side business with modest profit, the SEP's simplicity often wins. Roth solo 401(k)s also exist, which the SEP-IRA lacks.

Two cautions. First, the elective deferral is limited to 100 percent of your earned income from the business, so a business with a small profit cannot shelter the full employee amount. Second, every figure in this area - the deferral limit, the catch-up, the additions cap, and the Social Security wage base used to split the SE tax - changes almost annually, so this calculator makes them inputs. Enter the current-year numbers and treat the output as an estimate to confirm with a CPA.

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Calculate

$
Schedule C net profit (or K-1 self-employment income) before the SE-tax deduction.
yrs
$
Indexed annually; verify the current-year figure in the IRS cost-of-living notice.
$
Added to the elective limit from age 50; verify the current-year figure.
$
The 12.4% Social Security portion of SE tax stops at this earnings level; verify the current-year figure.
$
Caps deferrals plus employer contributions; indexed annually, verify the current-year figure.
Total solo 401(k) contribution34.9% of net profit$52,381
Employee elective deferralslimited to 100% of earned income from the business$24,500
Employer profit-sharing contribution20% of net profit after the ½ SE-tax deduction (25% of compensation under §415(c))$27,881
Half of self-employment taxdeductible; already removed from the employer base$10,597
SEP-IRA alternativesimpler paperwork, no employee deferrals$27,881
Room under the additions cap§415(c) cap of $72,000$19,619
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How the math works

  • Self-employment tax = 12.4% of SE net earnings up to the Social Security wage base + 2.9% Medicare on all SE net earnings; SE net earnings = net profit × 0.9235.
  • Employer (profit-sharing) contribution ≈ 20% × (net profit − ½ SE tax), the practical form of the statutory 25% of compensation under §415(c).
  • Employee side: elective deferrals up to the §402(g) limit plus catch-up at 50+, limited to 100% of your earned income from the business.
  • Total is capped by the §415(c) annual additions limit; the SEP-IRA ceiling equals the employer contribution alone.

Frequently asked questions

How much can a self-employed person contribute to a solo 401(k)?
Two amounts stack. As the employee you may defer up to the Section 402(g) elective limit plus a catch-up at 50, limited to 100 percent of your earned income from the business. As the employer you may add a profit-sharing contribution of about 20 percent of net profit after the half-SE-tax deduction. The total is capped by the Section 415(c) annual additions limit.
Why is the employer contribution about 20% and not 25%?
The statute allows 25 percent of compensation, but for a sole proprietor compensation is defined as net profit minus half the self-employment tax, and the deduction-interaction works out to approximately 20 percent of net profit. The calculator applies 20 percent to net profit after the half-SE-tax deduction, which is the standard approximation.
Is a SEP-IRA better than a solo 401(k)?
A SEP-IRA is simpler - one form, virtually no administration - but it has no employee-deferral side, so the ceiling is only the roughly-20-percent employer contribution. If your profit is high enough that the elective deferral matters, the solo 401(k) shelters more; if the profit is modest or you value simplicity, the SEP is usually enough. Solo 401(k)s also allow Roth accounts, which SEPs do not.
What is the 100%-of-compensation limit on deferrals?
Your elective deferral cannot exceed your actual earned income from the business for the year. A business with $15,000 of profit cannot support a $23,500 deferral no matter what the Section 402(g) limit says. The employer side is similarly limited by the same earned-income base.
Can I have a solo 401(k) and a 401(k) at a W-2 job?
Yes, but the elective deferral limit is shared across all 401(k) plans in a year. If you max the deferral at your day job, the solo 401(k) can still take the employer profit-sharing contribution. Keep both plan administrators informed to avoid excess deferrals.
Do these limits change every year?
Yes. The elective deferral limit, the catch-up, the annual additions cap, and the Social Security wage base used to compute self-employment tax are all indexed and adjusted almost annually. They are inputs in this calculator precisely for that reason - verify the current-year figures before making contributions.
When must a solo 401(k) be set up?
The plan documents generally must be adopted by your tax-filing deadline for the year, but elective deferrals must actually be moved out of your business accounts by December 31, so a decision made in April can only fund the employer side. A SEP-IRA can be opened and funded as late as the extended filing deadline. Confirm deadlines with your plan provider.

This calculator is an educational estimate, not tax or financial advice. Deferral limits, the additions cap, the wage base, and the plan rules change annually, and the 20-percent employer formula is an approximation of the statutory calculation. Confirm the current-year figures and your plan specifics with a CPA or fiduciary adviser.

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