Self-Employed Retirement Contribution Deduction Calculator

About the SEP/Solo 401k Deduction

This calculator estimates the maximum deductible retirement contribution a self-employed person can make to either a SEP-IRA or a Solo 401(k), based on net self-employment profit. Because self-employed retirement limits are tied to net earnings after the self-employment tax deduction rather than gross profit, the two plan types produce different maximum contribution amounts at the same income level. Freelancers, sole proprietors, and single-member LLC owners can use it to see roughly how large a deductible contribution they could make before year-end.

How It Works

Enter your net self-employment profit and choose SEP-IRA or Solo 401(k). The calculator first backs out an estimated self-employment tax deduction, then applies each plan's contribution rules to what remains: a flat 20% cap for a SEP-IRA, or a combination of an employee salary deferral plus a 20% employer profit-sharing contribution for a Solo 401(k). The result shows the maximum contribution amount that plan would allow for the entered profit.

SE tax deduction = Net Profit x 0.9235 x (15.3% / 2) Adjusted Net Earnings = Net Profit - SE tax deduction SEP-IRA contribution = min(Adjusted Net Earnings x 20%, $70,000) Solo 401(k) employee deferral = min($23,500, Adjusted Net Earnings) Solo 401(k) employer contribution = min(Adjusted Net Earnings x 20%, $70,000 - employee deferral) Solo 401(k) total = employee deferral + employer contribution

Formula & Methodology

The calculator approximates net earnings from self-employment by multiplying net profit by 92.35% (the standard adjustment for the employer-equivalent portion of self-employment tax) and then subtracting half of the resulting self-employment tax figure, using a combined 15.3% SE tax rate. That adjusted figure, not the raw net profit entered, is what both plan types use as their contribution base. For the SEP-IRA, 20% of that adjusted base is compared against the $70,000 annual dollar limit for 2025 and the smaller of the two applies. For the Solo 401(k), the employee deferral (capped at $23,500 for 2025) is set aside first, then the employer contribution fills in up to 20% of the adjusted base, capped so the combined total never exceeds $70,000.

Examples

SEP-IRA at $100,000 net profit

With $100,000 in net self-employment profit, the SE tax deduction works out to about $7,065, leaving roughly $92,935 in adjusted net earnings. Twenty percent of that is about $18,587, the maximum SEP-IRA contribution, since it falls well under the $70,000 cap.

Solo 401(k) at $150,000 net profit

At $150,000 in net profit, adjusted net earnings come to roughly $139,403. The Solo 401(k) allows a full $23,500 employee deferral plus an employer contribution of about $27,881, for a total maximum near $51,381 - exactly $23,500 more than a SEP-IRA alone would allow at the same income.

Advantages

Shows the effect of the self-employment tax adjustment on contribution room, a step many quick estimates skip.
Puts SEP-IRA and Solo 401(k) maximums side by side so the difference in allowed contribution size at the same profit level is easy to see.
Applies the current-year dollar caps automatically so contribution room does not need to be looked up separately.

Common Mistakes

Applying the 20% contribution rate directly to gross business revenue or raw net profit instead of the smaller adjusted net earnings figure.
Assuming a SEP-IRA and Solo 401(k) always allow the same maximum contribution, when the Solo 401(k)'s added employee deferral usually allows more at low-to-moderate profit levels.
Overlooking that the Solo 401(k) employee deferral and employer contribution share a single combined dollar ceiling rather than stacking without limit.

Edge Cases to Watch For

At very low net profit, the employee deferral is capped at adjusted net earnings itself, since you cannot defer more than you actually earned.
The $70,000 combined limit for 2025 caps total contributions for high earners regardless of plan type once adjusted earnings are high enough.
The employer contribution in the Solo 401(k) branch shrinks dollar-for-dollar with however much was already set aside as an employee deferral, since both draw from the same $70,000 ceiling.
This tool does not add the extra age-50-and-over catch-up contribution amounts some savers are also eligible for.

Common Use Cases

Freelancers and independent contractors deciding how much to set aside before a SEP-IRA or Solo 401(k) contribution deadline.
Sole proprietors and single-member LLC owners comparing which plan type gives more contribution room at their income level.
Anyone doing year-end tax planning who wants a rough deductible contribution ceiling before consulting a plan provider or tax professional.

Frequently asked questions

Why can a Solo 401(k) often allow a bigger contribution than a SEP-IRA at the same income?

A SEP-IRA only allows the employer-style profit-sharing contribution (roughly 20% of adjusted net earnings), while a Solo 401(k) allows BOTH that same employer contribution AND a separate employee salary deferral - at lower to moderate self-employment income levels, this employee deferral portion can meaningfully increase total allowable contributions compared to a SEP-IRA alone.

Related calculators

Income Tax EstimatorEstimate your US federal income tax using 2025 marginal tax brackets.Self-Employment Tax CalculatorEstimate self-employment tax (Social Security + Medicare) on your net earnings.Sales Tax CalculatorCalculate sales tax and total price for a purchase.VAT CalculatorAdd or remove VAT from a price.

Conclusion

Because the two plan types apply different rules to the same adjusted earnings figure, running both scenarios at your actual net profit is the clearest way to see which allows a larger deductible contribution. These results are estimates for planning purposes; confirm actual limits with your plan provider or a tax professional before filing.