Free SEP IRA contribution calculator. Calculate your maximum SEP IRA contribution as a self-employed individual. Accounts for self-employment tax deduction and 25% net earnings limit.
The SEP IRA Contribution Calculator determines your maximum contribution to a Simplified Employee Pension (SEP) IRA as a self-employed individual. The calculation isn't as simple as "25% of income" — it requires adjusting for the self-employment tax deduction first.
SEP IRAs are popular among freelancers, sole proprietors, and small business owners because they allow substantially higher contributions than traditional or Roth IRAs, with minimal administrative requirements.
Enter your net self-employment income to see your maximum contribution, the effective contribution rate, and how it compares to other retirement account options for 2025. The SEP-IRA allows self-employed individuals and small business owners to contribute up to 25% of net self-employment income, with a maximum contribution that far exceeds a traditional IRA. The contribution formula involves a net-earnings adjustment that many find confusing, but this calculator handles the math automatically and compares your result against traditional IRA, SIMPLE IRA, and Solo 401(k) alternatives.
Self-employed individuals often don't realize how much they can save tax-deferred through a SEP IRA. The contribution limit is up to $69,000 for 2025, far exceeding traditional IRA limits. This calculator handles the complex net-earnings adjustment automatically. Knowing your exact limit prevents both underfunding and excess contributions that trigger penalties.
Step 1: SE Tax Deduction = Net SE Income × 0.9235 × 0.153 / 2 Step 2: Adjusted Net Earnings = Net SE Income − SE Tax Deduction Step 3: SEP Contribution = min(Adjusted Net Earnings × 25%, $69,000) Effective Rate ≈ 20% of net SE income (after SE tax adjustment)
Result: Max SEP contribution: $41,735 (effective rate: 20.87%)
With $200,000 net SE income: SE tax deduction is $14,130, adjusted earnings are $185,870, and 25% of that is $46,468 — but capped calculations yield $41,735. The effective contribution rate is about 20.87% of gross net income, not the full 25%.
SEP IRAs are the easiest high-limit retirement plan to set up. There's minimal paperwork, no annual filing requirements (Form 5500 not needed for solo plans), and you can open and fund one up to your tax deadline. For sole proprietors seeking simplicity with large contribution capacity, SEP IRAs are hard to beat.
The IRS treats a self-employed person as both employer and employee. The complication arises because the employer contribution is based on "net self-employment earnings," which is net SE income minus the deductible half of SE tax. This circular calculation produces the effective ~20% rate.
For incomes under approximately $200,000, a Solo 401(k) typically allows higher total contributions because it includes a $23,500 employee deferral (2025) plus the employer profit-sharing component. Above $300,000, the difference narrows. Evaluate both options at your specific income level.
The 2025 maximum SEP IRA contribution is $69,000 or 25% of compensation (net self-employment earnings after adjustment), whichever is less. For self-employed individuals, the effective rate is approximately 20% of net Schedule C income.
For self-employed individuals, you must first subtract the deductible half of self-employment tax from net earnings before calculating the 25%. This adjustment reduces the effective contribution rate from 25% to approximately 20% of gross net self-employment income.
A Solo 401(k) allows both employee deferrals ($23,500 in 2025) and employer profit-sharing (25% of comp). At incomes below ~$200,000, a Solo 401(k) often allows higher total contributions. SEP IRAs are simpler to set up and administer but lack the employee deferral component.
Yes. SEP IRA contributions don't affect your Traditional or Roth IRA contribution limits. However, having a SEP IRA means you're covered by an employer plan, which may limit the deductibility of Traditional IRA contributions depending on your income.
You can make SEP contributions up to your tax filing deadline, including extensions. For most sole proprietors, that's April 15 (or October 15 with an extension). You can even open a SEP IRA after year-end and make contributions retroactively.
You must contribute the same percentage for all eligible employees who are 21+, have worked 3 of the last 5 years, and earned at least $750. The contributions are immediately 100% vested. This can make SEP IRAs expensive for businesses with multiple employees.