2025 solo 401(k) and SEP-IRA calculator
What you could contribute for tax year 2025 under each plan, on 2025 limits — and why a SEP-IRA may still be open to you for that year.
US Uses United States federal tax rules
Updated August 28, 2026
These are the 2025 limits — a $23,500 employee deferral and a $70,000 combined cap. For a contribution you are making for the current year, use the 2026 calculator.
A closed year is not necessarily closed
This is the part worth reading before anything else, because it is the difference between a page of historical trivia and money you can still save.
A SEP-IRA can be opened and funded after the tax year has ended — up to your filing deadline for that year, including extensions. If you extended a 2025 return, you have until 15 October 2026 to open a SEP and make a 2025 contribution, and it reduces your 2025 tax.
A solo 401(k) cannot be used this way. The plan had to exist by 31 December 2025, and employee deferrals had to be made by then. If you did not set one up during the year, the figures in the solo 401(k) column above are what you could have done, not what you can still do.
So for a closed year, read the SEP-IRA number as the actionable one. That is the whole reason this page is worth having.
2025 limits, and what they are now
| Limit | 2025 | 2026 | Change |
|---|---|---|---|
| Employee elective deferral (solo 401(k)) | $23,500 | $24,500 | +$1,000 |
| Total cap, employee + employer | $70,000 | $72,000 | +$2,000 |
| Catch-up, age 50–59 and 64+ | $7,500 | $8,000 | +$500 |
| Catch-up, age 60–63 | $11,250 | $11,250 | no change |
| Social Security wage base (sets the SE tax deducted first) | $176,100 | $184,500 | +$8,400 |
The wage base is in that table because it is not decoration: the employer contribution is 20% of profit less half your self-employment tax, and the wage base sets how much SE tax there is. A different wage base changes the contribution you are allowed even at identical profit.
Concretely, at $100,000 of profit, single, age 40: the 2025 SEP maximum is $18,587 against $18,587 for 2026, and the solo 401(k) totals are $42,087 and $43,087. Both sets come from the same engine as the calculator above.
Why the solo 401(k) usually wins
Both plans cap at $70,000 in 2025. That makes them look equivalent. They are not, because they get there differently.
A SEP-IRA has one contribution: the employer one, roughly 20% of your net self-employment income. That is the whole mechanism.
A solo 401(k) has two. You are both employee and employer, so you contribute in both capacities — up to $23,500 as an employee deferral, plus roughly 20% as the employer.
They converge only once 20% alone reaches the cap, at around $355,000 of profit. Below that the solo 401(k) shelters substantially more, and the gap is widest exactly where most freelancers sit.
The deadline that actually decides it
This matters more than the limits.
A solo 401(k) must exist by December 31. The plan has to be established before the year ends, and employee deferrals generally made by then too.
A SEP-IRA can be opened and funded right up to your filing deadline, including extensions — as late as October of the following year.
So you can finish a year, do your taxes in March, discover you owe more than expected, and then open a SEP and fund it to reduce the tax on a year that has already ended. You cannot do that with a solo 401(k).
Planning ahead before year end: open a solo 401(k). Already into the new year: a SEP is your only option, and a good one.
Catch-up contributions
- Under 50 — no catch-up
- 50–59 and 64+ — an extra $7,500
- 60–63 — an enhanced $11,250
Catch-up applies to the solo 401(k) only. SEP-IRAs allow no catch-up at any age, which widens the gap considerably for older savers.
What it does not reduce
Neither plan reduces self-employment tax. That is calculated on your profit before retirement contributions, so a $30,000 contribution still leaves the full 15.3% payable — see the self-employment tax calculator for what that part costs.
They reduce income tax only. Substantial — at a 24% marginal rate a $30,000 contribution saves roughly $7,200 — but not the ~38% people sometimes assume.
They also reduce your QBI deduction, since contributions lower qualified business income. The saving shown above accounts for this, which is why it is slightly less than marginal rate × contribution.
The employee restriction
A solo 401(k) is only available if you have no employees other than yourself and a spouse. Hire someone eligible and it must convert to a regular 401(k).
A SEP-IRA with employees requires you to contribute the same percentage of compensation for every eligible employee as for yourself. Contribute 20% for yourself and you contribute 20% for them.
Roth, briefly
The employee deferral portion of a solo 401(k) can usually be made as Roth — after-tax now, tax-free later. No deduction this year, so it will not help your current bill. In an unusually lean year, paying tax now at a low rate to avoid it later at a higher one can be the better trade.
The figures
Contribution limits are the 2025 statutory amounts. The employer rate is shown as "~20%" because the statute says 25% of compensation — but for the self-employed, compensation is net earnings after both the half-SE-tax deduction and the contribution itself, which solves to exactly 20% of profit less half your self-employment tax. It is not an approximation.
Where the 2025 figures come from
- IRS Rev. Proc. 2024-40 §2.01 — 2025 rate tables, all four filing statuses
- IRS Rev. Proc. 2024-40 §2.27 — 2025 §199A thresholds and phase-in ranges
- IRS Instructions for Form 1040 (2025) — standard deduction as amended by OBBBA
- SSA — 2025 Social Security wage base, $176,100
- IRS Notice 2024-80 — 2025 retirement plan contribution limits
- IRC §6654 — estimated tax safe harbour shares and thresholds