SEP IRA Save Up to $72,000 in 2026

For 2026, a SEP IRA contribution is limited to the lesser of 25% of compensation or $72,000. Only the first $360,000 of compensation counts toward the calculation. SEP IRAs have no catch-up contributions, so the $72,000 limit applies to participants of every age.

Self-employed owners effectively contribute about 20% of net self-employment earnings, not 25%. The IRS reduces the rate because the contribution itself is deducted when calculating net earnings, and you also subtract half of your self-employment tax first. The $72,000 cap is only reached at very high income, so use a calculator for your exact number.

Yes. You can open a SEP IRA and make 2026 contributions up to your business tax filing deadline, including extensions. For most sole proprietors, that is April 15, 2027, or October 15, 2027 if you file an extension. WealthRabbit’s digital setup is designed to take minutes, so you can open your account and contribute without paperwork delays.

Yes. If you have eligible employees, you must contribute for them, and at the same percentage of pay you contribute for yourself. Employees generally qualify at age 21 or older, with at least three of the last five years of service and $800 or more in compensation for 2026. You can choose less restrictive rules, but not stricter ones.

Employees cannot make their own salary contributions to a SEP IRA. Only the employer contributes, and all contributions are 100% vested immediately, so the employee owns them right away. Catch-up contributions are also not allowed. If you want employees to save from their own paychecks, a SIMPLE IRA or 401(k) is the better fit.

Employer SEP IRA contributions are generally tax deductible as a business expense, within IRS limits. Self-employed owners usually deduct them on their personal return. A SEP IRA typically has no annual IRS plan filing such as Form 5500, which is one reason it is among the simplest business retirement plans to maintain.

Both allow large contributions, but a Solo 401(k) lets you contribute as both employee and employer, so it can allow more at lower income levels. A SEP IRA is simpler: it has no employee deferrals, no loans, a later setup deadline (your tax filing date), and typically no annual IRS filing. A Solo 401(k) can require Form 5500-EZ once assets exceed $250,000.

A SEP IRA is funded only by the employer and allows much higher contributions, up to $72,000 in 2026. A SIMPLE IRA lets employees contribute from their paychecks, adds catch-up contributions, and requires a yearly employer match or contribution, but its limits are much lower. SEP IRAs suit owners who want flexibility, while SIMPLE IRAs suit teams who want to save together.

Yes. Under SECURE 2.0, SEP contributions can be designated as Roth, meaning they are taxed now and qualified withdrawals are tax-free later. Not every provider supports this yet. WealthRabbit supports Roth SEP IRA contributions, and you can choose Roth, traditional, or a split between the two.

SEP IRAs follow Traditional IRA rules. Withdrawals before age 59½ generally trigger regular income tax plus a 10% additional tax, unless an exception applies. Required minimum distributions begin at age 73 or 75, depending on your birth year. Qualified withdrawals from a Roth SEP are tax-free once IRS requirements are met.

Yes. You can contribute to a SEP IRA while also saving in a 401(k) at another job, or in your own Traditional or Roth IRA. Your SEP contributions do not reduce your personal IRA limit. Just remember that having a SEP can limit the deductibility of Traditional IRA contributions, depending on your income.