About the Profit Sharing Calculator
This profit sharing calculator allocates an employer contribution to a 401(k) profit-sharing plan across your employees. Choose a pro rata allocation, where everyone receives the same percentage of pay, or an integrated (permitted disparity) allocation, where pay above the integration level receives an extra percentage to make up for the Social Security tax the employer does not pay on it. Enter each employee’s compensation and any other annual additions, such as their own 401(k) deferrals, and the calculator shows each person’s allocation.
It is meant for small-business owners, payroll providers and plan sponsors deciding how large a contribution to make and seeing how it is shared. Results are checked against the 2026 IRS limits: compensation counted for the plan is capped at $360,000, total annual additions per person are limited to the lesser of $72,000 or 100% of pay, and the employer’s deduction for profit-sharing contributions is generally limited to 25% of eligible compensation.
Integrated allocations follow the permitted disparity rules in Treas. Reg. §1.401(l)-2: the extra percentage on excess pay can be no more than the base percentage and no more than 5.7 points (reduced to 5.4 or 4.3 points for some integration levels below the 2026 Social Security wage base of $184,500). This is a planning estimate — your plan document’s formula, eligibility rules and nondiscrimination testing (including new comparability formulas) control the real allocation, so confirm with your plan administrator.
With the default inputs, the allocation rate on all plan pay is 8.219%. Change any value above to recalculate instantly.
How to use the profit sharing calculator
- 1Enter the total profit-sharing contribution the business plans to make.
- 2Choose pro rata or integrated (permitted disparity) allocation, matching your plan document.
- 3Paste each eligible employee’s name, compensation and other annual additions for the year.
- 4Keep the 2026 limits unless your plan year uses different figures.
- 5Review each allocation, any amount blocked by the 415(c) limit, and the 25% deduction check.
Formula and method
With pro rata allocation, each participant’s share of the contribution P equals their plan compensation divided by total plan compensation, so everyone receives the same percentage of pay. Plan compensation is pay capped at the 2026 401(a)(17) limit of $360,000.
With integration, each person receives a base percentage b of all plan pay plus an excess percentage d of pay above the integration level. The calculator first tries d = b (solving b = P ÷ (ΣC + ΣE)); if that would exceed the maximum disparity (5.7 points when the integration level equals the Social Security wage base, or 5.4 or 4.3 points for certain lower levels), d is fixed at the maximum and b = (P − d × ΣE) ÷ ΣC. Each allocation is then capped so total annual additions stay within the lesser of $72,000 or 100% of pay, and the employer’s deduction is compared with 25% of total plan pay.
- P
- Total employer profit-sharing contribution
- Cᵢ
- Plan compensation for employee i (capped at the 401(a)(17) limit)
- Eᵢ
- Excess compensation above the integration level
- b, d
- Base percentage on all pay and excess percentage on pay above the integration level
Worked examples
$60,000 split pro rata across 5 employees
The owner’s $400,000 salary counts only up to $360,000, so total plan pay is $730,000. $60,000 ÷ $730,000 = 8.22% of pay for everyone: the owner gets $29,589, the $45,000 assistant gets $3,699. The contribution is well under the $182,500 deduction limit.
Same contribution, integrated with Social Security
Only the owner earns above the $184,500 integration level, with $175,500 of excess pay. Giving 5.7% on excess pay uses $10,003.50; the remaining $49,996.50 ÷ $730,000 = 6.85% goes to everyone on all pay. The owner receives $24,655.81 + $10,003.50 = $34,659.31, and the assistant gets $3,082 instead of $3,699 under pro rata.
Large contribution hitting the 415(c) limit
Pro rata, $150,000 on $450,000 of pay is 33.3%: the owner would get $120,000 but has only $72,000 − $24,500 = $47,500 of room, and staff would get $30,000. Only $77,500 can be allocated, and the $150,000 contribution is $37,500 above the 25% deduction limit of $112,500.
Frequently asked questions
What is the maximum profit-sharing contribution for 2026?+
Total annual additions to one person’s defined contribution accounts — employee deferrals, matching and profit-sharing contributions combined — are limited to the lesser of $72,000 or 100% of compensation in 2026, not counting age-50+ catch-up contributions. Only the first $360,000 of pay can be considered.
How much of a profit-sharing contribution can the employer deduct?+
The employer’s deduction for contributions to a profit-sharing or 401(k) plan is generally limited to 25% of the compensation paid to eligible participants for the year (counting pay only up to the $360,000 limit per person). Employee elective deferrals do not count against the 25% limit, but employer matching contributions do, so add any match to the profit-sharing amount when checking it. For a self-employed owner, compensation means net earnings from self-employment after the contribution deduction, which works out to about 20% of net profit.
What is permitted disparity in a profit-sharing plan?+
Permitted disparity (Social Security integration) lets a plan give a higher contribution rate on pay above an integration level, recognising that employers pay Social Security tax only up to the wage base. The extra rate is capped at the lower of the base rate or 5.7 percentage points, reduced for some integration levels.
Is pro rata or integrated allocation better?+
Pro rata is the simplest and gives every eligible employee the same percentage of pay. Integration shifts some of the contribution toward higher earners while still passing nondiscrimination rules automatically. New comparability (cross-tested) formulas can shift even more but require annual testing by a plan administrator.
Do profit-sharing contributions depend on company profits?+
No. Despite the name, a business does not need profits to make a profit-sharing contribution, and the amount can usually vary from year to year. The plan document must set out how contributions are allocated among participants.
Tax results are estimates based on published rules and simplified assumptions. They are not tax advice — check official guidance or a tax professional for your situation.
Sources
- IRS Notice 2025-67 — 2026 retirement plan limitations
- IRS — 401(k) limit increases to $24,500 for 2026
- 26 CFR §1.401(l)-2 — Permitted disparity for defined contribution plans
- IRS Topic 751 — Social Security and Medicare withholding rates (2026 wage base)
- IRS Publication 560 — Retirement plans for small business (deduction limits)
- IRS — Choosing a retirement plan: profit-sharing plan