How much can self-employed people contribute to SEP IRAs?

For 2025, the SEP IRA contribution limit is the lesser of $70,000 or 25% of net self-employment earnings. For 2026, the limit increases to $72,000 or 25% of net self-employment earnings.

What is the downside of SEP IRAs?

SEP IRAs are funded by employers, so you can open one only if you are self-employed. You also have to make equal contributions for all eligible employees, so a SEP IRA may not be a good option if you have a lot of people working for you.

Can I contribute to both a SEP IRA and a 401(k)?

If you are eligible for, and have access to, both a SEP IRA and a 401(k), you can contribute to both. However, the combined limit for both accounts is $70,000 in 2025 and $72,000 in 2026.

Simplified Employee Pension (SEP) IRA Contribution Limits and Rules

If you've got a simplified employee pension, make sure you know the contribution limits.

By Christy Bieber – Updated Feb 11, 2026 at 2:46 PM EST | Fact-checked by Parker Hicks

Key Points

SEP IRAs allow high contribution limits: up to $70,000 in 2025 or 25% of net income.
Contributions to SEP IRAs are tax-deferred until withdrawal; penalties apply before age 59½.
Employers must equally contribute to all eligible employees' SEP IRAs.

If you're self-employed or own a very small business, then a SEP IRA can be a great way to save for retirement. SEP stands for simplified employee pension, and IRA stands for individual retirement account. A simplified employee pension plan confers many of the same benefits of a 401(k) plan but without nearly as much administrative hassle.

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SEP IRA contribution limits for 2025 and 2026

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Using a W-2 salary number, determine your maximum allowed contribution by multiplying your salary by 25%. For 2026, the contribution limit is the lesser of that number or $72,000. Remember that you must contribute the same amount on a percentage-of-salary basis to the SEP IRA of every eligible employee.

People who are self-employed and receive income on a contract basis can approximate their salaries by calculating their net income from self-employment. Your net self-employment income equals your gross income minus your business-related expenses, which include any costs of doing business and self-employment taxes. Multiply your net self-employment income by 25% to determine your maximum allowed SEP IRA contribution limit. In most cases, your maximum allowed contribution equates to slightly less than 20% of your gross income. Your contribution can't exceed $70,000 in 2024, or $72,000 in 2025.

Contribution percentages, provided that yours and your employees' match, are allowed to vary from year to year. If you're having a tough year, you can contribute 0%.

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SEP IRA Contribution Limit FAQs

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About the Author

Christy Bieber is a contributing Motley Fool retirement and Social Security expert covering retirement planning, 401(k)s, IRAs, and other personal finance topics. Christy has written about finance since 2008 and previously taught business courses at Bryant & Stratton College. She holds a law degree from UCLA and a bachelor’s degree in English, media, and communication with a certificate in business management from the University of Rochester. In law school, she earned three CALI Awards for Excellence for the highest scores in civil procedure and contract law exams.

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SEP IRA Contribution Limits

If you've got a simplified employee pension, make sure you know the contribution limits.