SEP-IRA Contribution Calculator
The most you can put in a SEP IRA this year — a one-form retirement plan for the self-employed, funded straight from your net profit.
Written by Dorothy Ibrahim, 10+ years in banking & finance
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How we calculate this
This calculator finds the maximum deductible SEP IRA contribution for a self-employed sole proprietor, funded straight from net profit. A SEP is a one-form retirement plan with no annual filing until it gets large, and it can be opened and funded as late as your tax-filing deadline. Enter your net business profit and tax year to see the dollar limit, the share of profit it shelters, and the monthly equivalent.
The formulas
- SEP compensation base
- net profit − deductible half of self-employment taxThe half-SE deduction is what turns "25% of compensation" into 20% of net profit.
- Maximum contribution
- min(compensation × 20%, annual SEP maximum)The SEP maximum is $72,000 for 2026 and $70,000 for 2025.
Worked example
- With the default $100,000 net profit for 2026, the deductible half of self-employment tax is $7,065, so the SEP compensation base is $100,000 − $7,065 = $92,935.
- The contribution is 20% of that base: $92,935 × 0.20 ≈ $18,587 — comfortably below the $72,000 SEP maximum for 2026.
- That shelters about 18.6% of net profit, or roughly $1,549 per month if you chose to fund it evenly (a SEP can also be funded in one lump up to your filing deadline).
Rates, benchmarks & sources
- 2026 SEP maximum ($72,000). — IRS Notice 2025-67
- Retirement Plans for Small Business — SEP deduction and the net-SE-earnings computation. — IRS Publication 560
- Deductible half of self-employment tax used to derive the compensation base. — IRS Schedule SE (Form 1040)
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- It assumes a sole proprietor with no employees; if you have eligible employees, SEP rules require comparable contributions for them, which this tool does not model.
- It computes the maximum deductible contribution, not a recommendation — you can contribute less.
- A SEP contribution reduces income tax but does not reduce self-employment (Social Security and Medicare) tax.
- It is an educational estimate for planning, not tax advice — confirm your number with a CPA/EA.
Frequently asked questions
How much can I contribute to a SEP IRA?
Up to 20% of your net self-employment earnings — net profit minus the deductible half of self-employment tax — capped at the annual SEP maximum ($72,000 for 2026). The "25% of compensation" you may have seen is the same figure expressed a different way; once the half-SE-tax deduction is applied, it works out to 20% of net profit for a sole proprietor.
SEP IRA or Solo 401(k) — which shelters more?
At the same income a Solo 401(k) usually wins, because it adds an employee salary deferral on top of the same 20% employer contribution. A SEP is simpler to open and has no annual filing until it grows large. If maximum tax deferral is the goal, compare both with our Solo 401(k) calculator.
When is the contribution deadline?
You can set up and fund a SEP IRA as late as your tax-filing deadline, including extensions — one of its biggest advantages. That means you can decide the amount after the year ends, once your net profit is known.
Does the contribution reduce my self-employment tax?
No. A SEP contribution is deducted from income for income-tax purposes, but it does not reduce self-employment tax, which covers Social Security and Medicare. It lowers your income-tax bill and grows tax-deferred until you withdraw it in retirement.