SEP IRA Contribution Calculator
Determine your maximum deductible contribution.
How SEP Limits Work
A Simplified Employee Pension (SEP) IRA allows business owners to contribute up to 25% of compensation, but the calculation differs based on your business structure.
For Sole Proprietors: You must calculate your "Adjusted Net Earnings." This requires deducting one-half of your self-employment tax. Furthermore, because the contribution itself is deductible, the IRS requires a special calculation that effectively limits your contribution to 20% of your adjusted net earnings.
For S-Corps: The calculation is simpler. It is based strictly on the W-2 wages you pay yourself, not the business profit distributions (K-1).
Key Definitions
Even if your income is high, you cannot contribute more than the annual cap.
2025 Cap: $70,000
2026 Cap: $72,000
The IRS limits the amount of income that can be considered for the calculation ($350k for 2025; $360k for 2026). Income earned above this threshold cannot be used to justify larger contributions.
Maximum Allowable Contribution
| Business Structure | Sole Proprietorship |
| Gross Income Input | $0.00 |
| Target Percentage | 25% |
| Calculation Breakdown | |
|---|---|
| Self-Employment Tax Deduction 1/2 of SE Tax (Deductible portion) | N/A |
| Plan Compensation Net Income Adjusted for SE Tax | $0 |
| Effective Rate Rate / (1 + Rate) | 0% |
| Calculated Contribution Before applying dollar caps | $0 |
| MAX ALLOWED SEP | $0 |