Small Business Retirement Contribution Estimator

Compare maximum contributions for two employer-sponsored plan options available to business owners: a SEP IRA and an Individual (Solo) 401(k).

Figures reflect 2026 IRS limits (Notice 2025-67)

1. Earnings

For a self-employed owner. Uses the IRS Pub. 560 "Rate Table for Self-Employed": a plan stated at 25% works out to an effective 20% once the circular definition of compensation is resolved.

Net profit (Schedule C, or K-1 net earnings) Before any retirement plan deduction.

2. Other earnings

Earnings from a day job share the Social Security wage base with your self-employment income.

Other earnings, e.g. from a day job (W-2 Social Security wages) Reduces the Social Security wage base left over for self-employment tax, since the wage base is shared across all your earnings.

Information and interactive calculators are made available as educational and self-help tools for your independent use and are not intended to provide investment, tax, accounting, legal, or financial planning advice. These calculators estimate contribution limits and eligibility under 2026 IRS cost-of-living figures (IRS Notice 2025-67) and the earned-income formula in IRS Publication 560. They do not account for multiple-plan aggregation, top-heavy or nondiscrimination testing, plan-document provisions, or every edge case in the Internal Revenue Code. Results depend on the accuracy of the data entered. All examples and outputs are hypothetical and for illustrative purposes only. Please confirm final contribution amounts with a CPA or tax advisor before funding a plan.

Retirement Contribution Glossary

Definitions, formulas, limits, and cautions

Plan Types

SEP IRA

Simplified Employee Pension Individual Retirement Arrangement

An employer-funded retirement plan in which contributions are made only by the employer. For a self-employed owner, the business makes the contribution on the owner's behalf.

Caution: If the business has eligible employees, the same contribution percentage generally must be made for them as well.

Individual 401(k)

Solo 401(k) / One-participant 401(k)

A 401(k) plan covering a business owner with no full-time employees other than a spouse. The owner can contribute both as the employee (elective deferrals) and as the employer (profit-sharing contributions).

Caution: Plans with assets above $250,000 at year end generally must file Form 5500-EZ.

W-2 Owner-Employee

Owner paid W-2 wages by their own corporation

An owner of an S-corporation (or C-corporation) who receives W-2 wages from the business. Contributions are based on W-2 compensation rather than net self-employment earnings.

Caution: S-corp distributions are not compensation and do not count toward contribution calculations.

Earnings

Net Profit

Schedule C or Schedule K-1 net earnings

Business income after business expenses but before any retirement plan contribution for the owner.

Self-Employment Tax

Social Security and Medicare tax for the self-employed

The self-employed pay both the employer and employee halves of Social Security (12.4%, up to the wage base) and Medicare (2.9%) on 92.35% of net profit. Half of this tax is deductible when computing plan compensation.

Formula:SE tax = min(0.9235 × profit, remaining SS base) × 12.4% + 0.9235 × profit × 2.9%

Caution: Additional 0.9% Medicare tax is not included in this deduction.

Social Security Wage Base

2026 Social Security taxable maximum: $184,500

The maximum amount of earnings subject to the 12.4% Social Security tax. It is shared across all of your earnings, so W-2 wages from another job reduce the base left for self-employment income.

Formula:Remaining base = max($184,500 − other SS wages, 0)

Net Earnings from Self-Employment

Plan compensation for a self-employed owner

Net profit reduced by the deduction for one-half of self-employment tax. This is the compensation figure used for SEP and solo 401(k) employer contributions, capped at the annual compensation limit.

Formula:NESE = min(net profit − ½ SE tax, $360,000)

Limits

Compensation Limit

IRC 401(a)(17) limit — $360,000 for 2026

The maximum amount of compensation that can be taken into account when calculating plan contributions.

Annual Additions Limit

IRC 415(c) limit — $72,000 for 2026

The maximum combined employee and employer contributions to a defined contribution plan for the year, excluding catch-up contributions.

Elective Deferral

Employee contribution — IRC 402(g) limit $24,500 for 2026

The amount you choose to contribute from compensation as the employee. The limit applies per person across all 401(k) and 403(b) plans, not per plan.

Caution: Contributions to a day-job 401(k)/403(b) reduce what is left for the solo 401(k).

Catch-up Contribution

Additional deferral for age 50+

An extra elective deferral allowed for participants age 50 or older by year end: $8,000 for 2026 (ages 50–59 and 64+), or $11,250 enhanced catch-up for ages 60–63. Catch-up contributions sit outside the annual additions limit.

Caution: Higher earners may be required to make catch-up contributions on a Roth basis.

Formulas

Employer Contribution

Profit-sharing / nonelective contribution

The contribution made by the business in its role as employer. For a self-employed owner it is limited to the smaller of the reduced-rate test and the half-the-difference test; for a W-2 owner it is 25% of W-2 compensation.

Formula:Self-employed: min(20% × NESE, (NESE − regular deferral) ÷ 2)

Reduced Rate

IRS Pub. 560 Rate Table for Self-Employed

Because a self-employed owner's compensation is itself reduced by their own contribution, a plan rate stated at 25% converts to an effective 20% of net earnings from self-employment.

Formula:Effective rate = stated rate ÷ (1 + stated rate) = 0.25 ÷ 1.25 = 20%

Half-the-Difference Test

IRC 415(c) earnings limit

Total contributions cannot exceed earned income. For a self-employed owner, this means the employer contribution cannot exceed half of the difference between net earnings and the employee's regular deferral.

Formula:Limit = (NESE − regular deferral) ÷ 2

Caution: This test is easy to miss and is often the one that actually binds at lower income levels.

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Small Business Retirement Contribution Estimator

1. Earnings i

2. Other earnings

1. Earnings