About the SEP IRA Calculator
This SEP IRA calculator works out the most you can contribute to a Simplified Employee Pension for tax year 2026. Sole proprietors, freelancers, partners and single-member LLC owners enter their Schedule C or K-1 net profit; owners of an S or C corporation enter the W-2 wages the business pays them. The calculator applies the IRS self-employed rate, deducts half of your self-employment tax, and caps the result at the annual limit.
A SEP IRA is an employer-only plan: every dollar is an employer contribution, so the limit is a percentage of pay rather than a flat amount. For 2026 contributions are capped at the lesser of 25% of compensation or $72,000, and no more than $360,000 of compensation can be counted. If you are self-employed, the 25% effectively becomes 20% of net earnings because your “compensation” is reduced by the contribution itself.
Use it before filing to decide how much to deposit — you can fund a SEP IRA up to your tax-return due date, including extensions. If you have employees, you must contribute the same percentage of pay for each eligible employee, which this calculator does not model. The limits are editable so the tool stays accurate as the IRS adjusts them each year.
With the default inputs, the maximum sep ira contribution is $22,304.45. Change any value above to recalculate instantly.
How to use the sep ira calculator
- 1Choose whether you are self-employed or paid W-2 wages by your own corporation.
- 2Enter your net profit (Schedule C line 31) or your W-2 wages.
- 3Enter your marginal tax rate to estimate the tax you save.
- 4Leave the limits at 2026 values, or update them for another tax year.
- 5Deposit the result by your tax filing deadline, including extensions.
Formula and method
For corporate owners paid a W-2 salary, the business may contribute up to 25% of that salary, counting no more than the compensation cap C, and never more than the annual limit L. For sole proprietors and partners the IRS defines compensation as net earnings from self-employment minus the deduction for half of SE tax and minus the SEP contribution itself.
Solving “contribution = 25% × (E − contribution)” gives contribution = 20% × E, which is why self-employed people see an effective 20% rate. Self-employment tax is 15.3% on 92.35% of net profit, with the 12.4% Social Security portion stopping at the wage base. Self-employment tax uses the 2026 Social Security wage base of $184,500; the 0.9% Additional Medicare Tax, the $400 SE-tax threshold and contributions for employees are ignored.
- P
- Net self-employment profit
- W
- Social Security wage base
- E
- Net earnings after half of SE tax
- L
- Annual additions limit ($72,000 for 2026)
- C
- Compensation cap ($360,000 for 2026)
Worked examples
Freelancer with $120,000 net profit
Self-employment tax on $120,000 is $16,955.46, so net earnings are $120,000 − $8,477.73 = $111,522.27. Twenty percent of that is a $22,304.45 SEP contribution, which saves about $5,353 at a 24% marginal rate.
Consultant with $400,000 profit hits the cap
At $400,000 the Social Security part of SE tax stops at the $184,500 wage base, giving $33,590.60 of SE tax. Twenty percent of net earnings would be about $76,641, so the contribution is capped at the $72,000 limit.
S-corp owner paid a $100,000 salary
When your corporation pays you a W-2 salary, the business can contribute 25% of that salary: $100,000 × 25% = $25,000. Shareholder distributions do not count as compensation.
Frequently asked questions
What is the SEP IRA contribution limit for 2026?+
For 2026 the limit is the lesser of 25% of compensation or $72,000, with compensation counted up to $360,000. For self-employed people the 25% works out to about 20% of net profit after the SE tax deduction.
What is the deadline to contribute to a SEP IRA?+
You can make SEP IRA contributions for a tax year up to your business’s tax filing deadline, including extensions. For a sole proprietor on an extension that can be as late as October 15 of the following year.
Is a SEP IRA or solo 401(k) better?+
Both share the same $72,000 overall limit, but a solo 401(k) adds a $24,500 employee deferral (plus catch-up at 50+), so it lets you save more at low and moderate incomes. A SEP IRA is simpler, with no Form 5500 filing.
Do I have to contribute for my employees?+
Yes. If you have eligible employees you must contribute the same percentage of compensation for each of them as you contribute for yourself. Eligibility rules let you exclude workers under 21 or with short service.
Can I make catch-up contributions to a SEP IRA?+
No. SEP IRAs only accept employer contributions, so there is no age-50 catch-up. You can still make a regular Traditional or Roth IRA contribution on top of your SEP contribution if you are eligible.
Are SEP IRA contributions tax-deductible?+
Yes. Self-employed contributions are deducted on Schedule 1 of Form 1040, and corporate contributions are a business expense. They reduce income tax but not self-employment tax.
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 — Simplified Employee Pension Plan (SEP)
- IRS — SEP contribution limits
- IRS Publication 560 — Retirement Plans for Small Business
- IRS Notice 2025-67 — 2026 amounts relating to retirement plans and IRAs
- IRS Topic 751 — Social Security and Medicare withholding rates (2026 wage base)
- IRS — Self-employment tax (Social Security and Medicare taxes)