SEP IRA Calculator

Use this calculator to estimate the maximum SEP IRA contribution for self-employed income.

What this calculator does

The SEP IRA calculator estimates the maximum contribution allowed from net self-employment income. It applies the self-employment adjustment and the annual IRS limit from the central limits file.

It uses:

• net self-employment income
• self-employment adjustment
• SEP contribution rate
• IRS annual limit

SEP IRA Formula

SEP Contribution = lesser of Net Income × 92.35% × 20% or IRS Limit

Where:

• Net Income = self-employment earnings
• 92.35% = self-employment adjustment
• 20% = effective SEP contribution rate
• IRS Limit = annual maximum contribution cap

Example calculation

If:

• Net self-employment income = 120,000
• Adjusted income = 110,820
• Contribution rate = 20%
• Calculated contribution = 22,164

Then:

• The calculated amount is below the IRS limit
• Maximum SEP contribution = 22,164
• Effective contribution rate is about 18.47%
• The limit is not binding

The maximum SEP IRA contribution is 22,164.

What is a SEP IRA?

A SEP IRA is a retirement account for self-employed people and small business owners. Contributions are made by the employer side of the business.

Why SEP IRA planning matters

• estimates tax-advantaged savings capacity
• supports self-employed retirement planning
• helps compare SEP and Solo 401(k)
• prevents over-contribution

When to use this calculator

• estimating annual SEP contribution
• planning tax-year deductions
• comparing self-employed retirement options
• checking contribution limits

Common mistakes

• using gross revenue instead of net income
• ignoring the 92.35% adjustment
• exceeding the IRS limit
• confusing SEP with employee deferrals

SEP IRA vs Solo 401(k)

SEP IRA contributions are employer-only. Solo 401(k) plans can include employee deferral and employer profit-sharing.

Solo 401(k) may allow larger contributions at lower income levels.

FAQs

What is a SEP IRA?

A SEP IRA is a retirement account for self-employed people and small businesses.

How do you calculate SEP IRA contribution?

Multiply net self-employment income by 92.35% and 20%, then apply the IRS limit.

What is a good SEP IRA contribution?

A good contribution is the maximum you can afford without exceeding the annual limit.

What is the difference between SEP IRA and Solo 401(k)?

SEP is employer contribution only. Solo 401(k) can include employee and employer contributions.