Which is better for a freelancer: SEP IRA or Solo 401(k)?

Pick a SEP IRA for simplicity and for the ability to fund it as late as your filing deadline, including extensions. Pick a Solo 401(k) when you want the highest possible contribution, Roth options, participant loans, or the 50+ catch-up. Many freelancers start with a SEP and move to a Solo 401(k) as income grows.

What are the 2026 contribution limits for each plan?

For 2026 a SEP IRA allows up to 25% of compensation—20% of net earnings for the self-employed—capped at $72,000. A Solo 401(k) adds an employee deferral of up to $24,500 on top of employer profit-sharing, with the combined regular total also capped at $72,000, plus an $8,000 catch-up ($11,250 at ages 60–63) above that cap.

When must I act on a Solo 401(k) for 2026?

Employee salary deferrals for the 2026 plan year must be elected by December 31, 2026, because the deadline follows the plan year, not your tax return. Employer profit-sharing can follow later, up to your 2026 filing deadline including extensions. Confirm exact funding timing with your plan provider.

Can I have both a SEP IRA and a Solo 401(k)?

You generally cannot contribute to both for the same business and same year in a way that exceeds the $72,000 combined limit—the plans share the annual defined-contribution cap. Run your numbers through the calculators first so you do not exceed the limit and trigger a correction.

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No. The tools on this site run entirely in your browser—nothing you enter is uploaded, stored or shared with any server.

SEP IRA vs Solo 401(k) 2026: Limits, Deadlines & Which to Choose

Q: When is the deadline to set up a 2026 SEP IRA?

A SEP IRA for the 2026 tax year can generally be established and funded as late as your filing deadline including extensions—April 15, 2027, or October 15, 2027 if you extend. That makes it the easiest plan to fund once you know your year's profit for certain.

7 min read · Updated September 8, 2026

Two Powerful Retirement Plans for One-Person Businesses

For a freelancer or independent contractor with no employees, a SEP IRA and a Solo 401(k) are the two standout ways to save large amounts for retirement while cutting your current tax bill. Both let you contribute far more than an ordinary IRA, and both are controlled entirely by you—no employer plan to rely on.

For tax year 2026 both plans share the same underlying annual cap of $72,000 on most contributions. Where they differ is structure: a SEP IRA is a simple employer-funded account, while a Solo 401(k) lets you contribute in two roles—as the employee making elective deferrals and as the employer adding profit-sharing.

SEP IRA 2026: One Contribution, Very Little Paperwork

A SEP IRA works like an employer retirement account for yourself. You may contribute up to 25% of compensation—20% of net earnings once the self-employed adjustment is applied—with a $72,000 dollar cap for 2026. There are no employee deferrals and no catch-up contributions, which keeps administration minimal.

Its biggest practical advantage is the deadline: a SEP for the 2026 tax year can be established and funded as late as your filing deadline, including extensions (April 15, 2027, or October 15, 2027). If your income only becomes clear after year-end, a SEP is the easiest way to make a large, tax-deductible catch-up contribution.

Solo 401(k) 2026: Two Contribution Buckets

A Solo 401(k) lets you contribute as both employee and employer. In 2026 you can defer up to $24,500 of your earnings as the employee—$8,000 more as a catch-up if you are 50 or older, rising to $11,250 if you are 60 to 63. Employer profit-sharing then fills in the gap up to the $72,000 combined cap (catch-up sits above it).

That structure gives a Solo 401(k) a real edge at higher incomes: on $300,000 of net profit you can put roughly $55,000 to $72,000 into a Solo 401(k), while the same income reaches only about $55,000 through a SEP's 20% rate. The trade-off is more responsibility: a plan document, annual IRS reporting once assets pass $250,000, and stricter deadlines.

The December 31 Deadline That Matters

Solo 401(k) employee salary deferrals for the 2026 plan year must be elected by December 31, 2026—the deadline follows the plan year, not your tax return. Miss it and you lose the ability to make 2026 employee deferrals entirely, though employer profit-sharing can still be added later, up to your filing deadline including extensions.

SEP IRAs carry no such year-end urgency because the whole contribution can wait until filing time. If you are the kind of person who prefers to decide in April with full knowledge of your profit, that flexibility is valuable.

Roth, Loans and Other Differences

A Solo 401(k) can include a Roth option, letting you make after-tax deferrals that grow tax-free, and some plans allow participant loans—both features a SEP IRA does not offer. On the other hand, a SEP is funded entirely with pre-tax employer money, which is what most freelancers want when the goal is lowering taxable income.

Administration also differs. A SEP is essentially an IRA and needs no annual filing until it grows very large. A Solo 401(k) requires adopting a written plan and, once plan assets exceed $250,000 at year-end, filing Form 5500-EZ each year.

How to Choose

Pick a SEP IRA if you want simplicity, need no employee deferrals, or often decide contributions after year-end. Pick a Solo 401(k) if you want the highest possible contribution, value Roth options, are 50 or older and can use catch-up, or expect consistently strong income. Many freelancers start with a SEP for its ease and graduate to a Solo 401(k) as earnings grow.

Whichever you choose, contributions reduce your taxable income, so the money effectively costs less than the headline amount. Plan contributions must also be reasonable relative to your net earnings—the calculators below apply the 2026 limits and the self-employed adjustment for you.

See Your 2026 Limit in Seconds

Run your net profit through either calculator to see the exact maximum for your situation—calculated entirely in your browser.

SEP IRA Calculator →Solo 401(k) Calculator →

New to self-employment? Estimate your tax first with the Contractor Tax Estimator and map your broader savings plan with the Self-Employed Retirement Calculator.

Frequently Asked Questions

Answers to common questions about using this calculator.