Ohio Solo 401(k) vs. SEP-IRA Calculator

The IRS technically allows 25% of compensation, but for your own contribution as a sole proprietor, compensation is defined net of the contribution itself — a circular calculation. IRS Publication 560's simplified worksheet resolves this to an effective rate of 20% of your net earnings after the deduction for half your self-employment tax. This calculator uses that same 20% rate.

For contribution limits, yes — a Solo 401(k) includes everything a SEP offers (the employer contribution) plus an employee deferral on top, so it can never contribute less. The one real reason to choose a SEP is simplicity if you ever hire employees: a SEP requires giving them the same contribution percentage, while a Solo 401(k) only works if you and a spouse are the sole participants.

You can have both open, but your total contributions across all your own retirement plans still can't exceed the overall annual limit ($72,000 for 2026, plus catch-up if eligible) — so combining them doesn't let you contribute more than a Solo 401(k) alone would.

The 2026 elective deferral limit ($24,500, or more with catch-up) is shared across all 401(k) and 403(b) plans you contribute to in a year, including any W-2 job with a 401(k). If you also have a day job with a 401(k), your deferral room in your Solo 401(k) is reduced by whatever you already deferred there.

Starting in 2026, if your prior-year wages exceeded $150,000, any age-based catch-up contribution must be made as a Roth (after-tax) contribution rather than pre-tax. This affects the tax treatment of the catch-up portion, not the contribution limit itself — this calculator shows the maximum dollar amount either way.

No. Retirement contributions reduce your taxable income for federal and state income tax purposes, but self-employment tax is calculated on net profit before any retirement contribution — that's why this calculator applies your marginal income tax rate to estimate savings, not your full effective rate.