SEP IRA vs Solo 401(k) for Freelancers
A **SEP IRA** is simple—up to ~25% of net self-employment income with easy admin. A **solo 401(k)** allows employee deferrals plus employer profit share, often enabling higher total contributions and optional Roth and loan features.
Step by step
1. Estimate net SE income
Contribution caps tie to Schedule C profit after half SE tax.
2. Need employee deferral?
Solo 401(k) lets $23k+ deferral if income supports it.
3. Plan admin
Solo 401(k) needs Form 5500-EZ when balance exceeds IRS threshold.
SEP vs solo 401(k)
High earners often max out faster with solo 401(k); SEP wins on simplicity.
- SEP IRA: Easy setup; employer-only contributions; no loan.
- Solo 401(k): Higher potential total; Roth option; more paperwork.
Use our calculators
Common mistakes
- Missing Dec 31 SEP deadline
- Exceeding 415 annual addition limits across plans
FAQ
Can I have both?
Generally one plan per business—consult CPA before stacking.