For most freelancers, a Solo 401(k) lets you contribute more than a SEP IRA at the same income, often much more. That’s because it adds an employee deferral of up to $24,500 in 2026 (plus catch-up from age 50) on top of the same 20% employer-style contribution a SEP allows. A SEP IRA is simpler to run, has a later setup deadline and doesn’t need an EIN. It only catches up with the Solo 401(k) near the top: both are capped at $72,000 for 2026, before catch-up.
Side by side
| Solo 401(k) | SEP IRA | |
|---|---|---|
| Who it's for | Business owner with no employees (or owner and spouse) | Any size business; eligible employees must be covered |
| Employee deferral | Up to $24,500 (up to 100% of compensation) | None |
| Employer-style contribution | 25% of compensation (20% of net profit minus half SE tax for you) | Same 25% / 20% |
| Overall cap (excl. catch-up) | $72,000 | $72,000 |
| Catch-up, age 50+ | +$8,000 (+$11,250 instead at ages 60–63) | None |
| Roth option | Designated Roth contributions, if the plan allows | Roth SEP IRA, if the provider offers it |
| Deadline to set up (sole proprietor) | Tax filing deadline, without extensions | Tax filing deadline, including extensions |
| Annual IRS filing | Form 5500-EZ once assets reach $250,000 | Usually none with Form 5305-SEP |
| EIN needed | Yes, for the plan's paperwork | Not generally |
- Who it's for
- Solo 401(k)Business owner with no employees (or owner and spouse)SEP IRAAny size business; eligible employees must be covered
- Employee deferral
- Solo 401(k)Up to $24,500 (up to 100% of compensation)SEP IRANone
- Employer-style contribution
- Solo 401(k)25% of compensation (20% of net profit minus half SE tax for you)SEP IRASame 25% / 20%
- Overall cap (excl. catch-up)
- Solo 401(k)$72,000SEP IRA$72,000
- Catch-up, age 50+
- Solo 401(k)+$8,000 (+$11,250 instead at ages 60–63)SEP IRANone
- Roth option
- Solo 401(k)Designated Roth contributions, if the plan allowsSEP IRARoth SEP IRA, if the provider offers it
- Deadline to set up (sole proprietor)
- Solo 401(k)Tax filing deadline, without extensionsSEP IRATax filing deadline, including extensions
- Annual IRS filing
- Solo 401(k)Form 5500-EZ once assets reach $250,000SEP IRAUsually none with Form 5305-SEP
- EIN needed
- Solo 401(k)Yes, for the plan's paperworkSEP IRANot generally
Sources: IR-2025-111 and Notice 2025-67 (2026 limits); IRS One-participant 401(k) plans page; Publication 560 (2025).
How much each lets you contribute
The numbers below come straight from the math in our Self-Employed Retirement Contribution Calculator. It uses the IRS reduced-rate method for self-employed contributions, the shared $24,500 deferral limit and the $72,000 overall cap.
| Net profit | SEP IRA | Solo 401(k), under 50 | Solo 401(k), age 50–59 |
|---|---|---|---|
| $30,000 | $5,576 | $27,881 | $27,881 |
| $60,000 | $11,152 | $35,652 | $43,652 |
| $100,000 | $18,587 | $43,087 | $51,087 |
| $150,000 | $27,881 | $52,381 | $60,381 |
| $250,000 | $47,043 | $71,543 | $79,543 |
| $400,000 | $72,000 | $72,000 | $80,000 |
$30,000
- SEP IRA
- $5,576
- Solo 401(k), under 50
- $27,881
- Solo 401(k), age 50–59
- $27,881
$60,000
- SEP IRA
- $11,152
- Solo 401(k), under 50
- $35,652
- Solo 401(k), age 50–59
- $43,652
$100,000
- SEP IRA
- $18,587
- Solo 401(k), under 50
- $43,087
- Solo 401(k), age 50–59
- $51,087
$150,000
- SEP IRA
- $27,881
- Solo 401(k), under 50
- $52,381
- Solo 401(k), age 50–59
- $60,381
$250,000
- SEP IRA
- $47,043
- Solo 401(k), under 50
- $71,543
- Solo 401(k), age 50–59
- $79,543
$400,000
- SEP IRA
- $72,000
- Solo 401(k), under 50
- $72,000
- Solo 401(k), age 50–59
- $80,000
Figures from our calculator's logic, rounded to the dollar. SEP = 20% of (net profit − half of SE tax), capped at $72,000. Solo 401(k) = $24,500 deferral + the same 20% employer contribution, capped at $72,000 or 100% of compensation, plus catch-up for the 50–59 column. At $30,000 the Solo 401(k) is limited by compensation itself ($30,000 − $2,119 half of SE tax = $27,881).
What the table shows:
- From $60,000 to $250,000 of profit in the table, the Solo 401(k) allows exactly $24,500 more than the SEP for someone under 50, and $32,500 more from 50 to 59. That’s the deferral, plus catch-up.
- At low incomes, the gap is smaller in dollars but huge in proportion. At $30,000, a SEP allows $5,576, while a Solo 401(k) can shelter all $27,881 of your compensation, $22,305 more, if you can afford to.
- At the top, compensation above $360,000 doesn’t count and both plans hit the $72,000 cap. The Solo 401(k) keeps only its catch-up advantage.
When a SEP IRA still makes sense
- You want minimal admin. A SEP set up with Form 5305-SEP usually needs no annual information return. A Solo 401(k) must file Form 5500-EZ once plan assets reach $250,000, per the IRS.
- You’re late. It’s after your filing deadline, but you’ve extended your return. You can still set up and fund a SEP for that year, per Publication 560.
- You already max out a 401(k) at a day job. Your $24,500 deferral limit is per person, not per plan (see Can I Have a Solo 401(k) and a 401(k) at Work?). Once it’s used up, the Solo 401(k) and the SEP give you the same employer-side room, and the SEP is simpler. See also Can I Contribute to a SEP IRA and a 401(k) at the Same Time?
- You have (or plan to hire) employees. A Solo 401(k) is only for an owner with no employees, or the owner and a spouse (Can My Spouse Contribute to My Solo 401(k)?).
When a Solo 401(k) is the clear winner
- You want to save more than 20% of your net profit.
- You’re 50 or older and want catch-up contributions: $8,000, or $11,250 at ages 60–63, for 2026.
- You want a Roth option for the deferral portion, and your plan provider offers designated Roth contributions.
- You’re comfortable getting an EIN and, eventually, filing Form 5500-EZ.
Bottom line
If you’re a solo freelancer who wants to save as much as possible, the Solo 401(k) usually wins, by $24,500 or more a year across most income levels in 2026. The SEP IRA wins on simplicity and deadlines, and it’s just as good if a day-job 401(k) already uses up your deferral limit. For the full walkthrough of a SEP on its own, see SEP IRA for the Self-Employed in 2026. To plug in your own profit, use the calculator.