$22,304the most you can contribute for yourself — 18.6% of profit, from a plan that says 25%
| Step 1 — net profit | Schedule C line 31 | $120,000 |
| Step 2 — deduction for self-employment tax | half of $16,955 | $8,478 |
| Step 3 — net earnings | $120,000 − $8,478 | $111,522 |
| Step 4 — your reduced rate | 25% ÷ (25% + 1) — the IRS's own worksheet | 0.200000 |
| Step 5 — the contribution | $111,522 × 0.200000 | $22,304 |
- A plan written at 25% is 20% of profit, not 25%. That gap is the most common way a good year is over-contributed.
- The deduction goes on Schedule 1, not Schedule C, so it reduces income tax and leaves self-employment tax exactly where it was.
- This is the defined contribution route. A defined benefit plan is a different limit and an actuary's calculation, not a percentage.
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The figures this uses
| Figure | 2026 | Source |
|---|---|---|
| Defined contribution limit | $72,000 for 2026 under section 415(c)(1)(A) | irs.gov |
| Compensation that can be counted | $360,000 for 2026 under section 401(a)(17) | irs.gov |
| Self-employed reduced contribution rate | the plan rate divided by the plan rate plus one — the IRS's example is 10%, which becomes 0.090909 | irs.gov |
| Where a self-employed contribution is deducted | Schedule 1, not Schedule C, so it reduces income tax and not self-employment tax | irs.gov |
How the calculation works
A self-employed person's contribution to their own SEP or similar plan is not the plan's rate times profit. Publication 560 has a worksheet for it, and the calculator follows it step by step.
- Net profit, from Schedule C line 31.
- Half of self-employment tax, worked out on that profit, is subtracted. This is the same figure that goes on Schedule 1, line 15.
- Net earnings from self-employment are what remains.
- The reduced rate. The plan rate is divided by one plus itself. A plan written at 25% becomes 25% ÷ 125%, or 20%. A plan at 10% becomes about 9.09%.
- The contribution. Net earnings, counted up to $360,000, times the reduced rate.
- The limit. The result is capped at $72,000, the 2026 limit under section 415(c)(1)(A).
The reduced rate is the step people miss. Multiplying profit by the plan's 25% is the most common way a good year is over-contributed.
What it leaves out
- Employees' contributions. If you have employees in the plan, you contribute for them at the full plan rate, and that is a business expense. The calculator covers only your own.
- Elective deferrals to a solo 401(k), which have their own limit on top of the employer contribution. See the Schedule 1 deferral.
- Income tax. The result is how much you may contribute, not how much tax it saves; that depends on your bracket.
The contribution is deducted on Schedule 1, line 16, and when the money is later withdrawn it comes back on a Form 1099-R.
Common questions
My SEP plan says 25%. Why does the calculator give about 20%?
Because for your own contribution the 25% is applied after the contribution and half of self-employment tax come off your profit. Publication 560's worksheet turns the plan rate into a reduced rate: 25% ÷ 1.25 is 20%.
Where is the contribution deducted?
On Schedule 1, line 16, not Schedule C. It lowers income tax, and leaves self-employment tax exactly where it was.
Is there a dollar limit?
Yes. For 2026 the defined contribution limit under section 415(c)(1)(A) is $72,000, and no more than $360,000 of compensation can be counted under section 401(a)(17).
Why is half of self-employment tax subtracted first?
Because Publication 560 measures a self-employed person's compensation as net profit less the deduction for half of self-employment tax, and less the contribution itself. Step 2 takes out the first; the reduced rate in step 4 takes out the second.
Does this work for a defined benefit plan?
No. A defined benefit plan has a different limit, worked out by an actuary rather than as a percentage of profit.
This calculator is for educational purposes only and does not constitute tax, legal, or financial advice. It covers United States federal tax and simplifies in the ways noted beside each result. Consult a qualified tax professional about your situation.