SEP IRA Calculator

Enter net self-employment income and select the business type. The supplied formula distinguishes a sole proprietor from other business types. Add current age, existing SEP IRA balance, expected annual return, and planned retirement age to estimate growth.

The employee-count input does not appear in the supplied compute function. That means the displayed projection does not adjust for employees or calculate contributions you may owe to eligible employees. This is a major real-world limitation: SEP employer contributions generally must follow plan terms and eligibility rules for employees, so review the plan and IRS requirements before funding only the owner’s account.

The calculator assumes annual contribution growth at the selected raise rate, up to the stated SEP limit. With the default 0% raise, the annual contribution remains $25,586 in the projection.

For a sole proprietor, the calculator first adjusts net self-employment income by 92.35%, then estimates the deductible half of self-employment tax, and applies a 20% contribution rate to the remaining compensation base. The 2026 maximum SEP contribution is capped at $72,000.

Adjusted income = $150,000 × 0.9235
                = $138,525

Estimated half self-employment tax = $138,525 × 15.3% × 50%
                                   = $10,597.16

Compensation base = $138,525 − $10,597.16
                  = $127,927.84

Estimated contribution = $127,927.84 × 20%
                       = $25,585.57
                       = $25,586 rounded

The effective rate divides the rounded maximum contribution by gross net self-employment income:

Effective rate = $25,586 ÷ $150,000 × 100
               = 17.057%, displayed as about 17.06%

The result is lower than 20% of $150,000 because the sole-proprietor calculation applies the contribution percentage to a reduced compensation base. Tax calculations can depend on other income, deductions, and business circumstances; confirm the allowable contribution using tax records and current IRS guidance.

The 2026 SEP IRA contribution limit is the lesser of 25% of compensation or $72,000. For a self-employed person, the effective contribution calculation is not simply 25% of gross business income; the allowable amount uses a self-employment adjustment. This calculator’s sole-proprietor method applies a 20% rate to its adjusted compensation base, which is designed to approximate the self-employed contribution calculation.

SEP contributions are made by the employer, not as employee salary deferrals. A SEP IRA does not use the same employee elective-deferral structure as a 401(k). For comparison, the 2026 401(k) elective deferral limit is $24,500, and the total employee-plus-employer limit is $72,000, subject to plan rules and eligibility. A Solo 401(k) may allow both an employee deferral and an employer contribution for an owner with no eligible employees other than a spouse.

The calculator displays a Solo 401(k) comparison estimate of $49,086 for the default inputs. Its simplified calculation adds a $24,500 employee deferral to an employer contribution based on the adjusted sole-proprietor base, capped at $72,000. This comparison is not a full plan eligibility analysis and may not reflect age-based catch-up contributions, other workplace plan deferrals, or all limitations.

If your business has eligible employees, a SEP arrangement can require contributions for eligible employees using the same contribution percentage applied to the owner, subject to plan terms. The calculator’s employee-count input is not used in its compute function, so it does not quantify that potential cost. Review the IRS’s SEP plan information and compare with a SIMPLE IRA calculator if you are considering a different small-business plan.

The $49,086 Solo 401(k) figure is not automatically the better choice. A Solo 401(k) may permit a larger contribution at a given income, while a SEP IRA may be simpler to administer. Employee eligibility, other retirement-plan contributions, administrative costs, and whether you need Roth or loan features can influence the choice. For another plan comparison, see a SIMPLE IRA calculator.

The calculator starts with the $50,000 current balance and applies 7% annual growth. It adds contributions after the initial age-40 row, so the projection includes 25 annual contributions from ages 41 through 65.

Total contributions = $25,586 × 25
                    = $639,650

Projected age-65 balance = starting balance
                         + cumulative contributions
                         + modeled investment growth
                         = $50,000 + $639,650 + $1,200,012
                         = $1,889,662

The precomputed projection reports $639,650 total contributions, $1,200,012 investment growth, and $1,889,662 projected balance. The final age-65 year includes a modeled contribution of $25,586 and growth of $121,949. The projection assumes a steady annual return; actual returns vary and contributions may not be made at the same point in each year.

A 7% return is a scenario assumption, not a forecast. Test lower returns, a later retirement age, and changing contributions. A retirement calculator can help place the account in a broader income plan, while an IRA withdrawal calculator can estimate how withdrawals translate to cash flow.

For sole proprietors, the calculator uses this sequence:

Adjusted income = net self-employment income × 92.35%

Compensation base = adjusted income − (adjusted income × 15.3% × 50%)

SEP contribution = lower of (compensation base × 20%) or $72,000

For other business types, the calculator applies 25% to entered income, subject to the $72,000 limit. The growth projection compounds the current balance and adds the annual contribution for each year after the starting age. It caps contribution increases at $72,000 when annual raise growth is entered.

The calculator does not account for every tax deduction, contribution deadline, employee contribution obligation, other plan contribution, or individual eligibility detail. Its displayed score is a limit-utilization rating, not a measure of investment suitability.

SEP IRA contributions are generally made to traditional SEP accounts and are typically tax-deferred; distributions are generally taxable as ordinary income, subject to applicable rules. The calculator estimates contributions and growth but does not calculate the tax deduction or the tax due on distributions. For withdrawal planning, compare a traditional IRA withdrawal estimate with a Roth IRA withdrawal calculator, keeping in mind that SEP IRAs are not Roth accounts by default.

Traditional SEP IRA assets are generally subject to required minimum distribution rules. Under current federal law, the RMD starting age is 73 for many account owners, rising to 75 in 2033 under SECURE 2.0 for affected individuals. Review required minimum distributions explained and consult current IRS rules for your birth year and account type.

Is the $25,586 contribution the maximum for every person earning $150,000?

No. It is the calculator’s result for its sole-proprietor assumptions. Business structure, earned income, other plan participation, plan terms, and tax calculations can change the allowable contribution.

Does a SEP IRA contribution reduce self-employment income by 25%?

Not by simply multiplying gross income by 25% in every case. The self-employed contribution is calculated using adjusted net earnings and a reduced effective contribution rate; this calculator models that through its 92.35% adjustment and 20% rate.

Can I contribute to both a SEP IRA and a Solo 401(k)?

Plan rules and annual limits coordinate across plans, and the same compensation cannot be used to exceed applicable limits. The calculator’s comparison is not a combined-contribution recommendation. Check current IRS rules and your specific plan documents.

Should I choose a SEP IRA or Solo 401(k)?

A SEP IRA may offer simpler administration, while a Solo 401(k) can allow employee salary deferrals and may produce higher contributions at some income levels. Employee eligibility, administrative burden, other workplace plan deferrals, and plan features matter; compare an actual plan design rather than only the modeled amounts.

Does the calculator include contributions for my employees?

No. Although it asks for number of employees, the supplied calculation does not use that input. Determine whether employees are eligible and what employer contribution the plan requires before estimating the business’s total cost.

Is the $1,889,662 projected balance guaranteed?

No. It assumes a constant 7% annual return and fixed contributions. Market returns vary, and actual balances can be lower or higher.

When are SEP IRA contributions due?

The contribution deadline generally depends on the business tax filing deadline, including extensions, but details vary by entity and circumstances. Verify the deadline and contribution rules with the IRS or a tax professional before filing.

Use the result as an initial contribution estimate, then verify the amount under your business structure and check employee eligibility. Compare plan features and total business costs, test several return assumptions, and review the tax treatment before making a contribution.