Who this is for: a sole proprietor (or single-member LLC taxed as one) with a SEP IRA and no eligible employees. It follows the Deduction Worksheet for Self-Employed in IRS Publication 560. If you're an S corporation owner paid a W-2 salary, the math is different: your limit is 25% of that salary.

Tax Year

Plan Contribution Rate

Net Profit From Your Business

Schedule C, line 31 (or Schedule F, line 34)

W-2 Wages Subject to Social Security (optional)

Only if you also had a job this year. Boxes 3 and 7 of your W-2s. These use up part of the Social Security wage base, which lowers your self-employment tax.

Your Maximum SEP Contribution

Self-Employment Tax (Schedule SE)

Net profit

Net earnings subject to SE tax (profit × 92.35%)

Social Security portion (12.4%, up to )

Medicare portion (2.9%)

Total self-employment tax

Publication 560 Deduction Worksheet

Step 1Net profit

Step 2Deduction for half of SE tax

Step 3Net earnings from self-employmentStep 1 minus step 2

Step 4Reduced rate for the self-employed

Step 5Step 3 × step 4

Step 6Compensation limit × plan rate

Step 7Smaller of step 5 or step 6

Step 8Contribution dollar limit

Maximum contribution (smaller of step 7 or step 8)

Deadline: SEP contributions for a tax year can be made up to your tax return due date, including extensions. You can even set up the SEP itself by that date. A contribution made in early can still count for if you tell the custodian which year it's for.

Already contributed more than this?

Contributing 25% of net profit is the most common SEP mistake. An excess left in the account triggers a 10% excise tax every year it stays. The Small Business Excess Contribution Fix identifies the correction path, calculates the earnings that must come out with it, and gives you a step-by-step plan.

See the Excess Contribution Fix

Wondering whether a Solo 401(k) would let you put away more? Try the free Small Business Retirement Plan Selector.

This calculator is for educational and informational purposes only. It is not tax, legal, or financial advice and does not create an advisor-client relationship. Confirm your figure with a tax professional before contributing. It assumes a sole proprietor with no eligible employees and no other retirement plan for the same business, and follows the Deduction Worksheet for Self-Employed in IRS Publication 560.

How Much Can a Sole Proprietor Contribute to a SEP IRA?

A SEP IRA lets an employer contribute up to 25% of each employee's compensation. When you're self-employed, though, you're the employer and the employee at the same time, and your "compensation" is your net profit after two deductions: half of your self-employment tax, and the SEP contribution itself. Because the contribution reduces the number it's calculated from, the IRS converts the 25% plan rate into a reduced rate of 20% for the owner. That's why the real maximum lands around 18% to 19% of net profit for most sole proprietors.

The Calculation, Step by Step

Start with net profit from Schedule C. Multiply it by 92.35% to get net earnings subject to self-employment tax, then apply 12.4% Social Security tax up to the annual wage base and 2.9% Medicare tax on all of it. Subtract half of that self-employment tax from net profit. Multiply the result by the reduced rate (20% for a 25% plan). Finally, compare against the two caps: the compensation limit times your plan rate, and the annual dollar limit. The smallest number wins.

A Worked Example: $100,000 of Net Profit

Net earnings subject to SE tax are $92,350 ($100,000 × 92.35%). Self-employment tax is $14,129.55, so the deduction for half of it is $7,064.78. Net earnings from self-employment are $92,935.22, and 20% of that is a maximum SEP contribution of $18,587. That's $6,413 less than the $25,000 most people expect.

The Limits That Cap the Contribution

Limit	2025	2026
Maximum SEP contribution	$70,000	$72,000
Compensation that can be counted	$350,000	$360,000
Social Security wage base (for SE tax)	$176,100	$184,500

For a 25% plan in 2026, the $72,000 cap is reached at roughly $376,000 of net profit. Above that, extra profit doesn't raise the contribution.

When Is the SEP Contribution Due?

SEP contributions are due by your tax return due date, including extensions. That makes the SEP one of the few plans you can both open and fund after the year ends. The details are in the business owner's exception for SEP contributions.

What If You Have Employees?

If you have eligible employees, you must contribute the same percentage of compensation for each of them that you contribute for yourself. This calculator covers only your own contribution. A plan with employees may also make a SIMPLE IRA or a Solo 401(k) alternative worth comparing.

SEP IRA or Solo 401(k)?

At lower incomes, a Solo 401(k) usually allows a much larger contribution because it adds an employee deferral on top of the same employer contribution. The comparison is laid out in Solo 401(k) vs SEP IRA.

Sources: IRS Publication 560, Retirement Plans for Small Business, Chapter 5 (Deduction Worksheet for Self-Employed and Rate Table for Self-Employed); Instructions for Schedule SE (Form 1040); IRS cost-of-living adjustments for 2025 and 2026 plan limits; Social Security Administration contribution and benefit base.