The two parts of a Solo 401(k)
A Solo 401(k) lets a self-employed person contribute as both employee and employer. The employee deferral is limited to $24,500 for 2026, or your earned income if lower, plus a catch-up of $8,000 at ages 50 and older, or $11,250 for ages 60 to 63. The employer contribution for a sole proprietor is generally up to 20% of net self-employment earnings after deducting half of self-employment tax. The combined limit is $72,000 for 2026, not counting catch-up contributions.
Because of the employee deferral, a Solo 401(k) can reach the limit at lower income than a SEP IRA.
How a SEP IRA compares
A SEP IRA only has the employer portion, which for the self-employed is also effectively 20% of net earnings after the SE tax deduction, capped at $72,000 for 2026. There is no employee deferral and no catch-up contribution. It is simpler to set up and run, which suits high earners who do not need the employee deferral to reach a large contribution. The compensation that counts is capped at $360,000 for 2026.
Notes and limits of this estimate
The calculator assumes a sole proprietor or single-member LLC taxed as a sole proprietor. S corporation owners calculate employer contributions from W-2 wages instead, and the results will differ. If you also defer into a 401(k) at another job, enter those deferrals so the employee limit is shared. Contribution deadlines and plan-setup rules differ between plan types, so confirm with your plan provider.
Contributions reduce income tax but not self-employment tax. Use the deduction estimator to see the tax effect.