SEP IRA Calculator
Your business income and the statutory limits
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Long-range scenario, not a guarantee. Small changes in returns, inflation, fees, taxes, and withdrawal timing can materially change the result.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter your net profit from Schedule C — line 31, before any retirement contribution and before the deduction for half your self-employment tax. A single-member LLC or a partner's share of ordinary business income goes in the same field.
- 02
If you pay yourself a W-2 wage from an S corporation instead, leave that line at zero and put the wage on the next one. Fill one income line or the other, not both: they are alternative routes, and a wage is measured completely differently from a profit.
- 03
Add the total pay of any eligible employees, then your marginal federal tax rate. The first sizes the bill the uniform-percentage rule sends you; the second prices the deduction.
- 04
Check the three statutory fields below that: the plan contribution rate, which opens on the statutory maximum of 25%, the $360,000 compensation limit, and the $72,000 annual additions ceiling. Advanced options holds the self-employment tax pieces — the 92.35% net-earnings factor, the 12.4% and 2.9% halves, and the $184,500 wage base — for anyone computing a different year.
- 05
Read the headline, then the worksheet under it: profit, less half your self-employment tax, times the reduced rate, tested against each ceiling in turn. The limit that binds tells you which of the three actually decided the answer, and therefore whether more profit would raise it at all.
Formula
Net earnings for self-employment tax = net profit × 92.35%. Self-employment tax = 12.4% of those earnings up to the $184,500 wage base, plus 2.9% of all of them. Plan compensation = net profit − half that tax; the 92.35% factor belongs to the tax computation and is applied once, never again to compensation. Reduced rate = the plan rate ÷ (1 + the plan rate), so 25% ÷ 1.25 = 20%, because the plan rate is measured on compensation after the contribution has come out of it. Your contribution is the smallest of three figures: plan compensation × the reduced rate; the $360,000 compensation limit × the full 25%, which is $90,000; and the $72,000 annual additions ceiling. On a W-2 wage from an S corporation there is no reduction and no half-SE-tax step — the contribution is a flat 25% of the wage against the same two ceilings. Every eligible employee then receives the same percentage of their pay that you took of your own compensation measured after your contribution.
Example
Enter $120,000 of Schedule C profit and a 24% marginal rate, leave the S corporation line at zero, and keep the statutory fields as they open. Net earnings are 92.35% of $120,000, so the self-employment tax is $16,955 and half of it — $8,478 — is deducted before anything else: plan compensation is $111,522. The reduced rate is 25% ÷ 1.25 = 20.0%, which gives $22,304. Neither ceiling reaches you — 25% of the $360,000 compensation limit would allow $90,000, and the annual additions ceiling $72,000 — so your own earnings are what bind. That $22,304 is 18.6% of the profit you typed, saves $5,353 of federal tax at 24%, and leaves $49,696 of room under the $72,000 ceiling. The next $1,000 of profit adds about $186 rather than $200, because half the extra self-employment tax comes off first. Now add $90,000 of eligible employee pay: your own contribution is 25.0% of your compensation measured after it comes out, so the same percentage of their pay is $22,500 and the business writes out $44,804 in total, all of it vested the day it lands.
Definitions
- Plan compensation
- What a self-employed person contributes against: net profit from Schedule C less the deduction for half the self-employment tax. Not the profit line, and not net earnings after the 92.35% factor — that factor is applied only inside the tax.
- Reduced rate
- The plan rate restated as a share of compensation before the contribution comes out: rate ÷ (1 + rate). A 25% plan is a 20% reduced rate. It exists only because a self-employed person's compensation shrinks by the contribution itself.
- Annual additions
- Everything credited to one plan for you in a year. Capped at $72,000 for 2026 under IRC 415(c). It is the ceiling a SEP hits at roughly $377,000 of Schedule C profit, whatever the percentage says.
Good to know
The worksheet, in the order Publication 560 runs it
The SEP limit is not one multiplication, it is a worksheet of three competing ceilings, and the useful thing about running it in order is that you find out which of the three is actually deciding your answer. Step one is net profit from Schedule C, line 31, before any retirement contribution. Step two subtracts the deduction for half your self-employment tax — the figure that lands on Schedule 1 — and what is left is called net earnings from self-employment, or in plan language, plan compensation. Note what step two does NOT do: it does not apply the 92.35% factor a second time. That factor belongs inside the tax computation, where net earnings are 92.35% of profit for the purpose of working out the 12.4% and 2.9% halves, and Publication 560's own worksheet then starts again from net profit and subtracts only the tax deduction. Applying 92.35% twice is the second most common error in this area and it runs the opposite way from the famous one: it understates the contribution by about seven percent. Step three multiplies plan compensation by the reduced rate — 20% where the plan says 25%. Step four multiplies the $360,000 compensation limit by the FULL rate rather than the reduced one, which surprises people until you see why: the compensation limit caps compensation as the plan measures it, which is already the after-contribution figure, so 25% of $360,000 is the right ceiling and it comes to $90,000. Step five is the flat $72,000 annual additions ceiling. Your contribution is the smallest of the three. On $120,000 of profit the three come out at $22,304, $90,000 and $72,000, so your own earnings bind and every extra dollar of profit still raises the answer — by about $186 per $1,000, not $200, because half the extra self-employment tax comes off before the rate is applied. The dollar ceiling only starts to bite at roughly $377,000 of profit, and from there more profit changes nothing at all. Nothing in any of this turns on filing status; there is no married-versus-single version of a SEP limit.
Why the 25% in your plan document is nearer 18.6% of your profit
This is the arithmetic that most competing calculators get wrong, always in your favour, which is the expensive direction. Two subtractions stand between the profit you typed and the contribution you get, and neither is optional. The first is the deduction for half your self-employment tax. Below the Social Security wage base the self-employment tax is 15.3% of 92.35% of profit, so half of it is 7.65% of 92.35%, which is 7.065% — meaning plan compensation is 92.935% of profit, every time, for anyone whose net earnings sit under $184,500. On $120,000 of profit the tax is $16,955, half of it is $8,478, and plan compensation is $111,522. Check it: 92.935% of $120,000 is $111,522 to the dollar. The second subtraction is the circularity, and it is the one people find genuinely surprising. A 25% plan contribution is 25% of compensation measured AFTER the contribution has been taken out, because the contribution is itself a business deduction that reduces the compensation it is measured against. If C is compensation before the contribution and r is the plan rate, the contribution x satisfies x = r × (C − x), which rearranges to x = C × r ÷ (1 + r). At 25% that is 0.25 ÷ 1.25 = 0.20 exactly. Put the two together and the share of raw Schedule C profit is 92.935% × 20% = 18.587%, which is the 18.6% the page prints. On $120,000 that is $22,304 — against the $30,000 a naive 25% of profit would produce, an overstatement of $7,696, or almost exactly a quarter. Contributing on the wrong number is not a rounding error: the excess is not deductible, it has to be withdrawn along with whatever it earned, and the correction runs through an amended return. The relationship drifts as income rises, because the Social Security half of the tax stops at the wage base while the Medicare half does not. At $400,000 of profit the deduction is proportionally smaller, plan compensation is $383,205, and the reduced rate produces $76,641 — 19.2% of profit rather than 18.6%. The $72,000 ceiling then cuts that back to $72,000, but the drift is real and it is why a single blended percentage of profit is never a safe shortcut.
One percentage, and everybody gets it
A SEP is the cheapest retirement plan in America to run right up to the day you hire someone, and then it becomes the most expensive. There is no matching formula, no vesting schedule and no way to give yourself more than you give the staff: whatever percentage of compensation the owner takes, every eligible employee receives the identical percentage of theirs, contributed by the business, fully vested the moment it lands. On $120,000 of profit your own $22,304 is 25.0% of your compensation measured after it comes out, so an employee paid $90,000 costs another $22,500 and the business writes a total of $44,804. You cannot reduce that with a vesting schedule, because there is none. You cannot condition it on the employee deferring, because a SEP has no employee deferrals — it takes nothing out of anyone's paycheck, only out of the business. And you cannot pay yourself a higher percentage than them under any plan design, because the uniform percentage rule is the whole substance of a SEP's qualification. What you can do is control who is eligible, and there are exactly three levers, all of them written into the plan document rather than decided year by year. You may exclude anyone under 21. You may exclude anyone who has not worked for you in three of the last five calendar years, which is the strongest of the three, because it takes a genuinely new hire three years to arrive — and note that a single day of work counts as a year for this test, so it excludes only the recently arrived. You may exclude anyone whose compensation this year is under $800. Beyond that, part-time staff, seasonal staff and family members on the payroll all count if they meet the test. Two traps worth knowing before you count: employees of another business you also control are counted with yours under the controlled-group rules, and so are leased workers in most arrangements. The one flexibility a SEP does have runs the other way and is genuinely valuable — the contribution is discretionary. You may write the plan at 25% and contribute 8% this year, or nothing at all in a bad year, so long as everyone eligible gets the same treatment. That is a freedom a plan with a mandatory employer contribution does not offer, and it is the reason a lot of lumpy, seasonal businesses stay with a SEP even after taking on staff.
What a SEP has that nothing else does, and what it lacks
The single best feature of a SEP is its deadline. It is the only one of the small-business plans that can be created after the year it covers has ended: established and funded up to your tax filing deadline including extensions, which is 15 October for a sole proprietor who extends. That is why it is the plan an accountant reaches for in March, when the return is on the desk, the profit turned out larger than anyone expected, and the question is what can still be done about it. Nothing else on the shelf answers that question. Against that, the list of things a SEP does not have is long and worth reading before you commit. There is no catch-up contribution at any age — turning 50, or 60, adds nothing, because catch-ups belong to plans that take money out of a paycheck. There are no employee deferrals at all; the salary-reduction SEP existed once and has been closed to new plans since 1996. There are no loans, because the money is sitting in IRAs. There is no Roth side in practice: SECURE 2.0 permits a designated Roth SEP contribution, but custodian support is thin enough that it is worth asking before assuming, and the answer is usually no. And because the money is in IRAs, a SEP balance sits squarely inside the pro-rata denominator that decides what a backdoor Roth conversion costs — someone running that manoeuvre annually should know that funding a SEP contaminates it. Three things that are easy to get wrong. First, a SEP does not consume your personal IRA limit: the contribution above is employer money and you may still put $7,500 of your own into a traditional or Roth IRA, $8,600 from age 50, though being covered by the SEP puts you inside the workplace-plan deduction phase-out on the traditional side. Second, the $72,000 annual additions ceiling is yours personally across plans you control, not per plan, so someone running two businesses cannot have two of them. Third, the money rolls out freely — into a traditional IRA or an employer plan, with no waiting period of any kind. If the missing employee deferral is the thing that bothers you, that is the specific gap a solo 401(k) fills by stacking a deferral on top of this same employer share, and the comparison has its own page.
Frequently asked questions
Is a SEP 25% of my income, or 20%?
Both figures are real and they measure different things. The statute says 25% of compensation, and for an employee — including an S corporation owner drawing a W-2 wage — that is exactly what it is: 25% of the wage, full stop. For a self-employed person, compensation is not the profit line. It is net profit less the deduction for half your self-employment tax, and the 25% is then measured on that figure AFTER the contribution has come out of it. Solving that circle gives 25% ÷ 1.25 = 20%, which is why every article says 20% and every plan document says 25%. Neither is wrong; it is one rate applied to two different bases.
Why does my contribution come to less than 20% of my profit?
Because 20% is a percentage of plan compensation, not of the profit you typed. Below the Social Security wage base, half your self-employment tax works out at 7.65% of 92.35% of profit, or 7.065%, so plan compensation is 92.935% of profit — and 92.935% of 20% is 18.587%. Enter $120,000 of profit and the page returns $22,304, which is 18.6% of it, against the $24,000 a flat 20% of profit would suggest and the $30,000 a flat 25% would. Above the wage base the Social Security half of the tax stops, the deduction shrinks as a share of profit, and the figure drifts back up toward 20%.
What does a SEP cost me once I have an employee?
The same percentage you took, on their compensation, immediately and irrevocably. A SEP has no matching formula to hide behind and no vesting schedule to claw anything back with — one percentage, everybody gets it. On $120,000 of profit your own $22,304 is 25.0% of your compensation measured after it comes out, so an employee paid $90,000 costs another $22,500 and the business writes out $44,804 rather than $22,304. There are only three levers: a SEP may exclude someone who has not worked for you in three of the last five years, who is under 21, or who earned less than $800 this year. You can also write the plan at a lower percentage than 25% — but the lower percentage applies to you too.
I pay myself a W-2 wage from an S corporation. Does the same arithmetic apply?
No, and it is simpler. The corporation has already paid the payroll tax on that wage, so there is no half-SE-tax step and no circularity to unwind: the contribution is a flat 25% of the W-2 wage, tested against the same $360,000 compensation limit and the same $72,000 ceiling. Enter $100,000 of wages and the page returns $25,000. The catch is that the wage has to be large enough — an owner keeping their salary low to hold down payroll tax has also capped this contribution at 25% of that low salary. S corporation distributions are not compensation and nothing can be contributed against them.
Can I still open a SEP for a year that has already ended?
Yes, and it is the only one of the small-business plans you can. A SEP may be established and funded up to your tax filing deadline including extensions — 15 October for a sole proprietor who extends — which makes it the plan to reach for in March, when the return is being prepared and the profit has turned out larger than expected. Designate the deposit for the year you are deducting it against; the custodian books it to the year it arrives unless you say otherwise.
Does a SEP use up my own IRA limit, and is there a catch-up at 50?
No to the first and no to the second. Everything on this page is employer money, so your personal $7,500 traditional or Roth IRA contribution — $8,600 from age 50 — sits on top of it, though being covered by the SEP does put you inside the workplace-plan deduction phase-out on the traditional side. There is no catch-up in a SEP at any age: the $8,000 and $11,250 catch-up figures belong to plans that take money out of a paycheck, and a SEP takes money only out of the business. A solo 401(k) adds an employee deferral on top of this same employer share for exactly that reason, and that comparison has its own page.