Self-Employed Retirement Plans
Solo 401(k), SEP-IRA or SIMPLE IRA: what each lets a sole proprietor contribute at your profit and age under the 2026 limits, and what the contribution costs after income tax and the QBI deduction it gives back.
- Methods explained
- Save scenarios
- Compare saved scenarios
- Chart
- Household prefill
Your business
The rest of the return
QBI deduction at high incomes
These matter only once taxable income passes $201,750, or $403,500 on a joint return.
Gets the most in
Solo 401(k)
$54,239 at this profit and age
Income tax it saves
$9,546
17.6% of each dollar contributed
What the contribution costs you
$44,693
$54,239 in, less the tax saved
QBI deduction it gives up
$10,848
$29,739 with no plan
The three plans at your numbers
| Plan | Your deferral | Employer share | Catch-up | Most it allows | You put in | Income tax saved | QBI deduction given up | Costs you | Saved per dollar in |
|---|---|---|---|---|---|---|---|---|---|
| Solo 401(k) | $24,500 | $29,739 | $0 | $54,239 | $54,239 | $9,546 | $10,848 | $44,693 | 17.6% |
| SEP-IRA | $0 | $29,739 | $0 | $29,739 | $29,739 | $5,234 | $5,948 | $24,505 | 17.6% |
| SIMPLE IRA | $18,100 | $4,433 | $0 | $22,533 | $22,533 | $3,966 | $4,507 | $18,567 | 17.6% |
2026 limits. A contribution lowers income tax, not self-employment tax.
How much each plan allows as profit rises
The Solo 401(k)'s deferral puts it far ahead at modest profits. A SEP catches up only near $380,000 of profit. A SIMPLE wins only at very low profits, where its match is figured before the contribution.
Where the limits start
How it works›
The 20% that looks like 25%. An employer can contribute 25% of compensation. A sole proprietor's compensation is net profit, less half of self-employment tax, less the contribution itself, so the 25% works out to 20% of profit less half of SE tax. Taking 25% of profit over-contributes. That share is also limited to 25% of $360,000 and, with any deferral, to $72,000.
Solo 401(k). A $24,500 salary deferral on top of the 20% employer share, $72,000 together. One deferral limit covers every 401(k) and 403(b) you have, so deferrals at another job come off it. At 50 the catch-up adds $8,000, and $11,250 from 60 to 63, outside the $72,000.
SEP-IRA and SIMPLE IRA. A SEP takes only the employer share and has no catch-up. A SIMPLE takes a deferral of $17,000, or $18,100 with 25 or fewer employees, a catch-up of $4,000 ($3,850 in those small plans) or $5,250 from 60 to 63, and a match of up to 3% of net earnings counted before any contribution.
The QBI give-back. The 20% qualified business income deduction is figured on business income after the retirement contribution, so a dollar contributed saves tax on about 80 cents below the threshold. Above $201,750 of taxable income, $403,500 joint, the deduction is squeezed over the next $75,000 or $150,000 by a cap tied to W-2 wages and property, and a service business loses it altogether. From 2026 it is never less than $400 on $1,000 or more of business income.
What it leaves out. State income tax, Roth contributions to any of these plans, the additional 0.9% Medicare tax, employees other than a spouse, who are owed contributions under every one of these plans, and a defined benefit plan, which can shelter far more for an older owner. Limits are from IRS Notice 2025-67 and Rev. Proc. 2025-32.