How much can I contribute to a SEP-IRA as a sole proprietor?

Up to 25% of net self-employment income, capped by the §415(c) annual dollar limit (indexed for inflation). The effective rate against Schedule C net profit is closer to ~20% after the §401(c) compensation adjustment for the self-employed. Confirm the current ceiling in IRS Pub. 560.

What is the SEP-IRA contribution deadline?

The §408(k)(6) extended due-date lets contributions for the prior tax year be made by the employer return’s extended due-date (typically the partnership/S-corp filing extension). Sole proprietors fund it by their individual extended return deadline — not April 15.

Does a SEP-IRA require contributions for my employees too?

Yes — if the SEP covers the owner, it must cover every eligible non-owner employee at the same proportional rate (same percentage of compensation for each employee with three years of service and the minimum age). A partial SEP covering only the owner is the §408(k) anti-discrimination trap that disqualifies the entire election.

Can I have both a SEP-IRA and a Solo 401(k)?

Generally no for the same business — the SEP and the Solo 401(k) sit on overlapping employer-side contribution room. Small-business owners sometimes keep a SEP for the catch-up simplicity and skip the Solo 401(k). Pick one plan per year to avoid §415(c) combined-limit errors.

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SEP-IRA contribution

SEP-IRA contributions for the self-employed (2026)

A SEP-IRA lets self-employed owners fund retirement up to 25% of net SE income — contribution limits, deadlines, eligible employees, and the §408(k) anti-discrimination rule explained.

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Citation backbone

This article rests on the research reference below. Suggestions may include source context that the practitioner should inspect and verify.

IRC § 408(k)IRS Pub. 560

Who can claim this

Who qualifies for the sep-ira contribution

Self-employed with net SE income above the SEP-IRA contribution threshold — employer + employee side combined.

Schedule C net profit redacted above the §408(k)(1) earned-income floor and supports the 25% / $69,000 limit.
All eligible employees received the same proportional SEP contribution (no discrimination error).
Contribution made by the §408(k)(6) extended due-date, not a late deposit that would invalidate the election.

How to claim — step-by-step

How to claim the sep-ira contributionon this year's return

Schedule C net profit redacted above the §408(k)(1) earned-income floor and supports the 25% / $69,000 limit.
.
All eligible employees received the same proportional SEP contribution (no discrimination error).
.
Contribution made by the §408(k)(6) extended due-date, not a late deposit that would invalidate the election.
.

What catches practitioners off guard

The risk to review

Why AI + human review matters here

A late or partial SEP contribution to only the owner triggers the §408(k) discrimination rule — every eligible non-owner employee must receive the same proportional share.

Taxerity.AI surfaces this and similar items for your firm's reviewer. The AI does the research; you keep the final judgment on whether the workload and evidence pattern warrant the deduction on a specific client's return.

FAQ

Common questions about the sep-ira contribution

Quick answers to the questions solo CPAs and enrolled agents ask us most often about this deduction.

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