What this number is
A SEP IRA and a solo 401(k) are not the same ceiling. Both columns use one Schedule C profit and the Publication 560 worksheet, with 2026 limits from Notice 2025-67. The table does not pick a winner. A SEP is simpler to run. The solo 401(k) can reach a higher total because it adds an employee deferral. The worksheet behind the solo column is on the solo 401(k) contribution calculator.
This version is one sole proprietor with no employees. If any employee earned $800 or more, the 2026 SEP eligibility threshold, the comparison stops. That $800 figure is not an owner's contribution cap. Deferrals already made at a job share the employee limit and reduce only the solo column. A SEP has no employee deferral, so that field does not reduce the SEP.
Worked example
At $100,000 of Schedule C profit, under 50, with no deferrals at a job, the self-employment base is $92,350. Self-employment tax is $14,129.55. Half is $7,064.775, and net earnings are $92,935.225. Twenty percent of net earnings is $18,587.045. Rounded half up at display, the SEP ceiling and the solo employer line both show $18,587. The solo deferral is $24,500, the solo total is $43,087, and solo room under $72,000 is $28,913. Multiplying the $100,000 by 25% produces $25,000, which skips half of the self-employment tax and uses the plan rate.
Why the formula
Publication 560 turns a 25% plan rate into a self-employed rate of 0.200000. The 20% applies to net earnings figured without deducting the contribution for yourself. Twenty-five percent of the $360,000 compensation cap is $90,000. In 2026 that step does not set the ceiling, because annual additions stop at $72,000. The worksheet still computes it.
The solo employer piece is the smallest of 20% of net earnings, the room left under $72,000 after the regular deferral, and half of net earnings left after that deferral. At $100,000 the 20% figure binds, so the two employer cells match. At $40,000, under 50, 20% of net earnings is about $7,435 and that is the SEP ceiling. Half of what remains after a $24,500 deferral is smaller, so the solo employer line shows $6,337.
The solo total assumes the person uses as much employee deferral as the worksheet allows, then the employer amount that remains. That is the larger total, not a recommendation. Catch-up sits in the deferral and outside the $72,000 cap: $11,250 for a person who turns 60, 61, 62, or 63 in 2026, and $8,000 for ages 50 through 59 and for 64 or older. The room line is the solo plan only.
Common mistakes
- Multiplying Schedule C profit by 25%, or using the 2025 cap of $70,000. The 2026 annual-additions cap is $72,000.
- Treating the SEP ceiling and the solo ceiling as one number, or putting catch-up inside the $72,000 cap.
- Ignoring elective deferrals already made at a W-2 job.
A negative profit has no contribution ceiling, and the dollar cells show $0. W-2 Social Security wages are assumed to be zero. Those wages use the $184,500 wage base first, so a sole proprietor who also has a W-2 job can owe less Social Security tax on the Schedule C profit, which changes the employer piece. Additional Medicare tax of 0.9% is not subtracted. The dollar ceiling is the same whether catch-up is pre-tax or Roth, and this page does not decide that character.
Form 5500-EZ
The IRS one-participant page, checked on 2026-11-04, says a one-participant 401(k) generally files Form 5500-EZ if it has $250,000 or more in assets at the end of the year, and that a plan with fewer assets may be exempt. The instructions at the stable IRS PDF that day were the 2025 edition, dated July 7, 2025, not a 2026 edition. They add three details. The $250,000 test adds the assets of every one-participant plan the employer maintains. If the combined assets exceed $250,000, every such plan files, including a plan that is itself under $250,000. The final plan year is filed even when assets are at or under $250,000.
Questions and answers
Why is the employer piece 20% instead of 25%?
Publication 560 turns a 25% plan rate into a self-employed rate of 0.200000, applied to net earnings after half of self-employment tax.
Are a SEP and a solo 401(k) the same limit?
A SEP has no employee deferral. At $100,000 of profit the SEP ceiling is about $18,587, and the solo 401(k) can add the $24,500 deferral.
What if the business has employees?
This comparison stops. It assumes a sole proprietor with no employees. An employee who earned $800 or more in 2026 can make that assumption false. The $800 figure is a SEP eligibility threshold, not an owner’s contribution cap.
When does Form 5500-EZ have to be filed?
The IRS one-participant page says a plan generally files Form 5500-EZ at $250,000 of assets. The 2025 instructions add that the test combines every one-participant plan, that every such plan files once the combined assets exceed $250,000, and that the final plan year files even when assets are at or under $250,000.
Other tools
The solo 401(k) calculator shows the same worksheet as one plan. The QBI calculator starts from the same profit and takes half of self-employment tax off before the 20% deduction. About names who is writing and what this site refuses to estimate.
Sources
Checked 2026-11-04. Publication 560 (the rate table and the deduction worksheet; the file then online was the 2025 edition, and chapter 2 states the 2026 caps). Notice 2025-67 for the $24,500 deferral, the $8,000 and $11,250 catch-up amounts, the $72,000 annual additions, the $360,000 compensation cap, and the $800 SEP eligibility threshold. The SSA 2026 fact sheet for the $184,500 Social Security wage base. The IRS one-participant 401(k) page for Form 5500-EZ. Planning estimate, not tax advice. No signup, no brokerage funnel.