Free Calculator
Solo 401(k) vs. SEP-IRA Calculator
Compare maximum contribution limits and resulting tax savings between a Solo 401(k) and a SEP-IRA for self-employed owners with no non-spouse employees.
Your situation
For self-employed owners with no employees. Solo 401(k) usually wins because of the employee deferral piece; SEP wins when admin simplicity matters most.
50+ unlocks $8,000 catch-up contribution on Solo 401(k).
Recommended plan
Solo 401(k)
$24,500 more shelter than the alternative
Read this carefully
Solo 401(k) must be established by December 31; contributions can be made up to the extended return due date. Solo 401(k) plans over $250K assets require Form 5500-EZ. Adding non-spouse W-2 employees disqualifies the Solo 401(k). Compare plan options.
Estimates for educational purposes only, not tax, legal, investment, or accounting advice. Your specific facts will change the result; confirm with a CPA before acting.Read the deeper analysis
Choosing between these plans involves more than the contribution limit, admin complexity, future hiring plans, Roth eligibility, and integration with your business tax structure all matter.
Frequently Asked
Solo 401(k) and SEP IRA questions
- Who can use a Solo 401(k)?
- Self-employed individuals with NO non-spouse W-2 employees. Sole proprietors, single-member LLCs, partnerships with only spouse partners, and S-corp owner-employees all qualify. Adding any non-spouse W-2 employee disqualifies the plan.
- Why does Solo 401(k) usually beat SEP-IRA?
- Solo 401(k) has two contribution buckets: employee deferral ($24,500 + $8,000 catch-up if 50+ for 2026) AND employer profit share (up to 25% of net SE comp). At low-to-mid profit levels, the employee deferral lets you shelter far more than SEP's 25% cap allows.
- When does SEP-IRA win?
- When admin simplicity is the priority. SEPs are set up with a one-page Form 5305-SEP and have essentially zero ongoing reporting. Solo 401(k) plans over $250K in assets require an annual Form 5500-EZ. If you're maxing both at the same SE comp, the contribution totals are similar but SEP is easier.
- What about the December 31 deadline?
- Solo 401(k) plans must be ESTABLISHED by December 31 to count for that tax year, though contributions can be funded up to the extended return due date (October 15). SEP-IRAs can be both established AND funded up to the extended due date, more flexible.
Keep reading
Self-Employment Tax
Combined Social Security + Medicare tax (15.3%) owed by self-employed individuals on net earnings.
GlossaryContribution Margin
Revenue minus variable costs, the dollars each sale contributes toward covering fixed costs and profit.
GuideQuarterly Estimated Tax for Self-Employed and Business Owners
If you're not on a W-2, the IRS expects four prepayments a year. Miss them and you owe penalties even if you pay in full at filing.
GuideSolo 401(k) vs. SEP-IRA for Self-Employed Owners
If you're self-employed with no employees, both plans let you stash big retirement contributions, but the math, deadlines, and admin differ.
GuideOwner Compensation: Salary, Distribution, and Profit Sharing
How owner-operators should pay themselves: salary vs. distribution split, reasonable comp, retirement contributions, and how it all interacts with tax.