SEP-IRA Calculator
Estimate your maximum SEP-IRA contribution from your compensation and contribution rate, with the IRS compensation cap and dollar limit applied.
How to use this tool
- Enter your eligible compensation (W-2 wages or net self-employment income).
- Set your contribution rate, up to the 25% maximum.
- Read your allowed contribution after the IRS caps are applied.
- Compare the uncapped figure to see when a limit reduces your contribution.
Find your maximum SEP-IRA contribution. Enter your compensation and rate, and the calculator applies the IRS compensation and dollar limits for you.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
Capped compensation = min(Compensation, $345,000) — the 2024 IRS compensation limit.
Uncapped contribution = Capped compensation × (rate ÷ 100), where the rate may not exceed 25%.
Allowed contribution = min(Uncapped contribution, $69,000) — the 2024 dollar cap. The effective percentage of total compensation can fall below the chosen rate once either ceiling binds.
How it works
A SEP-IRA (Simplified Employee Pension) lets self-employed people and small business owners shelter far more for retirement than a regular IRA — up to 25% of compensation, subject to an annual dollar limit. It is funded entirely by the employer (which, for the self-employed, is you), and contributions are deductible and grow tax-deferred.
This calculator applies the two ceilings the IRS imposes for 2024: the $345,000 compensation limit, which caps the base your percentage is applied to, and the $69,000 absolute dollar limit on the contribution itself. When compensation is high enough, the dollar cap binds first and your effective contribution rate falls below the 25% nominal rate, as the worked example for $400,000 of compensation shows.
For unincorporated self-employed filers the calculation is subtler: the deductible rate works out to about 20% of net self-employment income after the self-employment-tax deduction, rather than a flat 25% of gross. This tool models the simpler W-2 / capped-compensation case. Reviewed by the AbraCalc Retirement Desk against IRS SEP contribution rules. This calculator provides general information, not financial advice; consult a qualified professional for decisions about your own situation.
Worked example
$100,000 compensation at the 25% maximum rate
- Compensation $100,000 is below the $345,000 cap, so capped compensation = $100,000.
- Uncapped contribution = $100,000 × 25% = $25,000.
- $25,000 is below the $69,000 dollar limit, so it passes through unchanged.
- Allowed contribution = $25,000.
- Effective rate = $25,000 ÷ $100,000 = 25%.
Allowed SEP-IRA contribution: $25,000 — 25% of compensation, under the $69,000 cap.
Common mistakes to avoid
- Self-employed individuals applying the 25% rate directly to net self-employment income; the IRS formula reduces the effective rate to approximately 18.587% of net SE income after the SE tax deduction.
- Forgetting the $69,000 (2024) dollar cap; high earners often calculate 25% of compensation and miss that the contribution cannot exceed the statutory limit.
- Treating the SEP contribution deadline as the tax-filing deadline without extensions; contributions can actually be made up to the extended due date (October 15 for sole proprietors), giving extra time to fund.
Maximum SEP-IRA contribution by compensation (25% rate, 2024 caps)
| Compensation | 25% of compensation | Allowed contribution |
|---|---|---|
| $50,000 | $12,500 | $12,500 |
| $100,000 | $25,000 | $25,000 |
| $200,000 | $50,000 | $50,000 |
| $276,000 | $69,000 | $69,000 |
| $345,000 | $86,250 | $69,000 |
| $400,000 | $86,250 | $69,000 |
Key terms
- SEP-IRA
- A Simplified Employee Pension IRA — an employer-funded retirement account that allows large contributions for self-employed people and small businesses.
- Compensation limit
- The maximum compensation the IRS lets you count when computing the contribution — $345,000 for 2024.
- Dollar limit
- The absolute cap on the annual SEP-IRA contribution — $69,000 for 2024.
- Effective contribution rate
- The contribution expressed as a percentage of your full compensation, which can be below 25% once a cap binds.
Frequently asked questions
- How much can I contribute to a SEP-IRA?
- Up to 25% of compensation, capped at $69,000 for 2024. Compensation counted is itself capped at $345,000, so the dollar limit binds at higher incomes.
- Why is my effective rate below 25%?
- Once your compensation exceeds about $276,000, the $69,000 dollar cap kicks in before the full 25% is reached, so the contribution as a share of total pay drops below 25%.
- Is the SEP-IRA contribution tax-deductible?
- Yes. SEP-IRA contributions are made by the employer and are tax-deductible business expenses; the funds grow tax-deferred until withdrawal in retirement.
- Does this work for the self-employed?
- This tool models the capped-compensation case. Unincorporated self-employed filers use a roughly 20% effective rate on net income after the self-employment-tax deduction; consult IRS Publication 560.