How much you can stash tax-advantaged: SEP-IRA vs Solo 401(k).
Covers: self employed, 1099, freelance, contractor, gig, sep ira, solo 401k, solo 401(k), retirement, contribution.
Open the Self-Employed Retirement tool →Self-employment doesn't shut you out of retirement accounts; the opposite. Two plans let you contribute as both the 'employer' and the 'employee' of your own business. We start from your net self-employment earnings (your profit minus the deductible half of self-employment tax), then compute each plan.
A SEP-IRA lets you contribute about 20% of those net earnings (the employer share), capped at the annual defined-contribution limit. A Solo 401(k) lets you make that same ~20% employer contribution AND add an employee deferral on top, up to the 401(k) elective limit (plus a catch-up if you're 50 or older). Because the deferral stacks on top, the Solo 401(k) lets you save more, while the SEP-IRA is simpler to open and administer.
There are two ceilings, not one. §415(c)(1) limits what may go into the plan to the LESSER of the annual dollar limit and 100% of your compensation — which, for someone self-employed, is net earnings after the contributions themselves. Above roughly the elective-deferral limit the dollar figure is what binds and the 20% stacks on top as you would expect. Below it the second ceiling binds instead: the deferral alone already reaches everything you earned, so an employer contribution just takes room away from itself, and the total stops at your net earnings. When that happens the breakdown says so rather than quietly showing a smaller number. The catch-up sits outside this limit by statute, so it is added after.
Filing status and income flow to and from My Situation. The limits carry their IRS citation; this is the contribution ceiling, not advice on how much to actually save.
Free forever, with no account and no ads. Computed entirely on your device for U.S. taxes and benefits — nothing is ever sent anywhere. Educational information, not financial, tax, investment, or legal advice.