SEP IRA vs Solo 401(k): 2026 limits, rules and deadlines
Edited by Moe Ameen · Published
A SEP IRA and a Solo 401(k) share the same 2026 cap of $72,000, but they fill it differently. A SEP takes only employer contributions, up to 25% of pay, or 20% of net earnings for a self-employed owner. A Solo 401(k) adds a $24,500 employee deferral plus catch-ups, so below the cap it can hold more. A SEP has to cover eligible employees; a Solo 401(k) is for an owner with no employees besides a spouse.
Key takeaways
- Both plans cap 2026 contributions at $72,000, not counting catch-ups.
- A SEP IRA takes employer contributions only and has no catch-up.
- A Solo 401(k) takes contributions as the employee ($24,500 in 2026) and as the employer.
- Self-employed owners figure the employer share at 20% of net earnings, not 25%.
- A Solo 401(k) files Form 5500-EZ once assets pass $250,000; a SEP generally files nothing.
What's the difference between a SEP IRA and a Solo 401(k)?
A SEP IRA takes only employer contributions. A Solo 401(k) lets the owner contribute twice: as the employee and as the employer.
The IRS describes a one-participant 401(k) as a plan for a business owner with no employees, or that owner and a spouse [1]. The owner wears both hats, so they can make elective deferrals as the employee and nonelective contributions as the employer [1]. A SEP works the other way. The IRS says SEPs only permit employer contributions [2].
| SEP IRA | Solo 401(k) | |
|---|---|---|
| Who it's for | Any employer, including the self-employed; covers eligible employees [2] | An owner with no employees other than a spouse [1] |
| Total limit, excluding catch-ups | Lesser of 25% of compensation or $72,000 [3] | $72,000 [4] |
| Employee deferral | Not permitted [3] | Up to $24,500 [5] |
| Employer contribution | Up to 25% of each employee's pay; 20% of net earnings for the owner [2][6] | 25% of compensation; 20% of net earnings for a self-employed owner [1][6] |
| Catch-up, age 50 or older | Not permitted [3] | $8,000; $11,250 at ages 60 to 63 [5] |
| Roth option | Plan may allow a Roth SEP IRA [2][6] | Designated Roth deferrals, and some employer contributions can be Roth [6] |
| Deadline to set up | Return due date, including extensions [2] | Tax filing deadline, without extensions, for a sole proprietor with no employees [6] |
| Annual IRS return | Generally none, including Form 5500 [2] | Form 5500-EZ once assets top $250,000 at year end [6] |
What are the 2026 contribution limits for a SEP IRA and a Solo 401(k)?
$72,000 for both, before catch-ups. A Solo 401(k) can also take an $8,000 catch-up at 50 or older, or $11,250 at ages 60 to 63.
| Limit | 2026 | 2025 |
|---|---|---|
| Total defined contribution limit (SEP and Solo 401(k)) | $72,000 | $70,000 |
| 401(k) employee deferral | $24,500 | $23,500 |
| 401(k) catch-up, age 50 or older | $8,000 | $7,500 |
| 401(k) catch-up, ages 60 to 63 | $11,250 | $11,250 |
| Most compensation a plan can count | $360,000 | $350,000 |
| SEP minimum pay for an employee to be eligible | $800 | $750 |
| SIMPLE IRA employee deferral | $17,000 | $16,500 |
The 2026 figures come from the IRS's cost-of-living table and its November 13, 2025 announcement [4][5]. Catch-up contributions sit on top of the overall limit [1]. By our math, the most a 50-year-old could put into a Solo 401(k) for 2026 is $80,000, and $83,250 at 60 to 63, if earnings are high enough.
Why is the self-employed rate 20% instead of 25%?
Your own contribution lowers the earnings it's figured on. The IRS rate table turns a 25% plan rate into 20% for self-employed owners.
For a sole proprietor or partner, the IRS says plan compensation is net earnings from self-employment minus the deductible half of self-employment tax and minus your own contribution [7]. Because the contribution depends on itself, the IRS has you use a reduced rate instead [7].
In Publication 560's rate table, a 25% plan rate becomes 20%, and the deduction for employer contributions to a SEP or profit-sharing plan can't be more than 20% of net earnings figured without deducting contributions for yourself [6]. Employees of the business are still figured at up to 25% of their pay [2]. If you're still choosing a structure, see sole proprietor vs LLC.
Can I have a Solo 401(k) if I have employees?
Not as a one-participant plan. Once you hire employees who meet the plan's eligibility rules, the IRS says they have to be included.
The IRS defines a one-participant plan as one that covers only the owner, or the owner and spouse, who own the whole business, or only partners and their spouses [6]. If you hire employees and they meet the plan's eligibility requirements, you must include them [1].
A SEP covers employees from the start. An employee is eligible once they've reached 21, worked for you in at least 3 of the last 5 years and earned at least the minimum pay, $800 for 2026 [2][4]. The SEP then allows up to 25% of each employee's pay [2].
Do a SEP IRA and a Solo 401(k) have Roth options?
Both can. A SEP may now let contributions go to a Roth IRA, and a 401(k) can take Roth deferrals and some Roth employer money.
Under the SECURE 2.0 Act, a SEP plan may let an employee choose a Roth IRA to receive SEP contributions, for tax years beginning after 2022 [6]. The IRS says an employer may accept Roth contributions but isn't required to [2].
In a 401(k), designated Roth contributions count toward the same deferral limit as pre-tax ones, $24,500 for 2026, and certain matching and nonelective contributions made after 2022 can be designated Roth [6]. Whether a given plan offers these depends on its plan document and provider.
When is the deadline to open and fund a SEP IRA or Solo 401(k)?
A SEP can be opened and funded up to the return's due date with extensions. A Solo 401(k) has to be adopted by the filing deadline, without extensions.
| Step | SEP IRA | Solo 401(k) |
|---|---|---|
| Open the plan | By the return due date, including extensions [2][6] | By the tax filing deadline, without extensions, for a sole proprietor with no employees (2023 and later) [6] |
| Employee deferral | Not permitted [3] | Elect by the end of the tax year; deposit by the return deadline, including extensions [6] |
| Employer contribution | By the return due date, including extensions [2] | Profit-sharing contribution by the return due date, including extensions [6] |
Does a Solo 401(k) have to file Form 5500-EZ?
Only once plan assets are over $250,000 at year end, and in its final plan year. A SEP generally has no filing requirement.
Publication 560 says a one-participant plan with total assets of $250,000 or less at the end of the plan year doesn't have to file Form 5500-EZ, and that every plan should file one for its final plan year [6]. For a SEP, the IRS says the employer generally has no filing requirements, including Form 5500 [2].
Where does a SIMPLE IRA fit?
It's for employers with 100 or fewer employees. Employees defer up to $17,000 in 2026 and the employer adds a match or a fixed contribution.
You can set up a SIMPLE IRA if you had 100 or fewer employees who earned $5,000 or more from you the year before and you don't keep another retirement plan, apart from one for collective-bargaining employees [6]. The 2026 deferral limit is $17,000, with a $4,000 catch-up at 50 or older in most SIMPLE plans and $5,250 at ages 60 to 63 [5]. A SIMPLE IRA plan can be set up any time between January 1 and October 1 [6].
Which is better for the self-employed, a SEP IRA or a Solo 401(k)?
It depends on income, age and staff. Below the $72,000 cap, the Solo 401(k)'s deferral lets it hold more; a SEP is simpler and covers employees.
| Situation | Plan that fits | Why |
|---|---|---|
| No employees, earnings well under $360,000 | Solo 401(k) | The $24,500 deferral sits on top of the 20% employer share [5][6] |
| Age 50 or older | Solo 401(k) | SEPs don't permit catch-up contributions [3] |
| Has eligible employees, or plans to hire | SEP IRA (or a standard 401(k)) | A one-participant plan has to include eligible hires [1] |
| Past December 31 with no deferral election made | SEP IRA | Can still be set up and funded up to the extended return due date [2] |
| Wants the least annual paperwork | SEP IRA | Generally no Form 5500 filing [2] |
| Earnings high enough to hit $72,000 either way | Either | Same overall limit before catch-ups [3][4] |
Glisten worked example
What $100,000 of net earnings could go into each plan in 2026
Our arithmetic from the IRS's 2026 limits and the 20% rate [4][5][6], for one owner with no employees and $100,000 of net earnings after subtracting the deductible half of self-employment tax.
| SEP IRA | Solo 401(k) | |
|---|---|---|
| Employer contribution at 20% | $20,000 | $20,000 |
| Employee deferral | None | $24,500 |
| Total, under age 50 | $20,000 | $44,500 |
| Total, age 50 to 59 (adds the $8,000 catch-up) | $20,000 | $52,500 |
At this income the Solo 401(k) holds more than twice as much, because of the employee deferral. The gap closes as income rises. Both top out at $72,000 before catch-ups, and the SEP gets there at $360,000 of net earnings (20% of $360,000 is $72,000).
Is this right for you?
Best for
- Self-employed owners with no employees comparing how much each plan can hold in 2026.
- Owners deciding before December 31, when the Solo 401(k) deferral election is due.
Not ideal for
- Picking investments or a plan provider. This page compares IRS rules only.
- Tax advice for your situation. A tax professional or Publication 560's worksheets can figure your exact contribution.
- Businesses with employees, where plan design and nondiscrimination testing come into play.
Frequently asked questions
What is the SEP IRA contribution limit for 2026?
The lesser of 25% of compensation or $72,000 [3]. For a self-employed owner, the 25% becomes 20% of net earnings [6].
What is the Solo 401(k) contribution limit for 2026?
$72,000 in total, excluding catch-ups [4]. Within that, the employee deferral is up to $24,500, plus an $8,000 catch-up at 50 or older, or $11,250 at 60 to 63 [5].
Can my spouse be in my Solo 401(k)?
Yes. The IRS describes it as a plan for a business owner with no employees, or that owner and their spouse [1].
Does a SEP IRA allow catch-up contributions?
No. The IRS says elective deferrals and catch-up contributions aren't permitted in SEP plans. Grandfathered SARSEPs set up before 1997 are the exception [3].
When does a Solo 401(k) have to file Form 5500-EZ?
When its assets are more than $250,000 at the end of the plan year, and for the plan's final year [6].
How we know this
On November 2, 2026 we read the IRS's pages on one-participant 401(k) plans, SEPs and SEP contribution limits, its cost-of-living table for 2026 and 2025, its November 13, 2025 announcement of the 2026 limits, its guide to figuring a self-employed contribution, and Publication 560 (2025). We checked the overall comparison against NerdWallet's guide to self-employed retirement plans. The worked figures are our arithmetic. This page is general education, not tax or investment advice.
- One-participant 401(k) plans, IRS. Checked November 2, 2026.
- Simplified Employee Pension plan (SEP), IRS. Checked November 2, 2026.
- SEP contribution limits (including grandfathered SARSEPs), IRS. Checked November 2, 2026.
- COLA increases for dollar limitations on benefits and contributions, IRS. Checked November 2, 2026.
- 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 (IR-2025-111), IRS. Checked November 2, 2026.
- Publication 560 (2025), Retirement Plans for Small Business, IRS. Checked November 2, 2026.
- Self-employed individuals: calculating your own retirement plan contribution and deduction, IRS. Checked November 2, 2026.