A SEP IRA calculator estimates the most an employer, including a self-employed owner, can contribute to a simplified employee pension for 2026. Formula: W-2: 25% × pay (pay capped at $360,000); self-employed: 20% × (net profit − ½ self-employment tax); result capped at $72,000. A sole proprietor with $100,000 of net profit can contribute about $18,587.05. For an employee paid $80,000 in W-2 wages, the most is 25%, or $20,000.
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How to use the SEP IRA calculator
- Choose the compensation type: net self-employment profit, or W-2 wages from the business.
- Enter the amount for 2026.
- Read the employer contribution and the $72,000 dollar cap.
It does not take an employee deferral, because a SEP has only employer contributions. Contributions go into a traditional IRA in your name, so the money follows the usual IRA rules on withdrawals and required distributions. You can still contribute to your own traditional or Roth IRA in the same year, subject to the normal IRA limits and income rules.
What formula does the SEP IRA calculator use?
- Employees, including an owner paid W-2 wages by an S corporation: 25% of compensation, with compensation over $360,000 ignored.
- Self-employed: 20% of net profit after subtracting half of self-employment tax. This is the result of the IRS rate table in Publication 560 for a 25% plan rate.
- No contribution can exceed $72,000 for 2026.
SEP IRA calculator worked example
Results from the SEP IRA calculator for several owners:
| Compensation | Type | Contribution |
|---|---|---|
| $50,000 | Net profit | $9,293.52 |
| $100,000 | Net profit | $18,587.05 |
| $200,000 | Net profit | $37,176.57 |
| $80,000 | W-2 wages | $20,000.00 |
| $400,000 | Net profit | $72,000.00 (cap) |
For $100,000 of profit, self-employment tax is about $14,130, half is $7,065, and 20% of the remaining $92,935 is $18,587.05.
If you have employees
A SEP must cover every eligible employee, and the plan uses the same percent of pay for each of them as for you. The IRS lets a plan exclude people under 21, those paid less than a small dollar amount for the year, and those who have not worked for you in at least three of the last five years. If you contribute 20% for yourself, you generally contribute 25% of pay for eligible staff, since their percent is figured on W-2 wages. The SEP IRA calculator only figures one person, so run it for each employee.
SEP IRA or solo 401(k)?
For the same profit, a solo 401(k) usually allows more, because it adds an employee deferral of up to $24,500 on top of the employer share. At $100,000 of profit, the SEP IRA calculator gives $18,587.05, while a solo 401(k) can reach about $43,087. A SEP is simpler: there is no Form 5500-EZ, and you can open and fund it up to your tax-filing deadline, including extensions. If you have employees, compare the cost of covering them under each plan.
Deadlines and deductions
Contributions for 2026 can be made up to the due date of your business return, including extensions, and are deducted by the business, or on Schedule 1 for a sole proprietor. Because the deduction lowers income tax but not self-employment tax, the saving is your marginal income tax rate times the contribution. Keep the figure with your tax records so you can show how you reached it.
Net profit here means the amount from Schedule C, or your share of partnership self-employment income, before the retirement deduction. If you have a loss year, no contribution is allowed for that year. In the SEP IRA calculator, net profit of about $377,000 or more reaches the $72,000 cap, so more profit does not raise the contribution. Below that, every extra $1,000 of profit adds roughly $186 to the limit.
Estimates for education only, not tax, legal or financial advice. Check current rules with the tax authority or a qualified adviser.
Related converters and calculators
Related calculators:
- IRA calculator: growth
- Retirement calculator: savings target
- Self-employment tax calculator: SE tax
Sources
IRS: Simplified Employee Pension plan (SEP); IRS Publication 560: Retirement plans for small business; IRS Notice 2025-67: 2026 retirement plan limits.
Questions about this calculator
What is the SEP IRA limit for 2026?
25% of compensation, up to $72,000. Compensation over $360,000 is not counted.
Why is it 20% for the self-employed?
The 25% rate is applied to net earnings after the contribution itself and half of self-employment tax, which works out to 20% of net profit after the SE tax adjustment.
Can I make employee deferrals to a SEP?
No. A SEP takes only employer contributions.
When is the deadline for 2026 SEP contributions?
The due date of your business tax return, including extensions.
Do I have to contribute for employees?
Yes, for each eligible employee, at the same percent of pay you use for yourself.
Check the assumptions and units before relying on a result. Financial, tax and health estimates do not replace advice for your individual circumstances.
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