Both plans cap at $72,000 for 2026, but at typical freelance incomes the solo 401(k) lets you contribute far more. Deadlines, Roth options, and how to choose.
Short answer: at most freelance income levels, the solo 401(k) lets you contribute more — often dramatically more — than a SEP IRA, because it adds a $24,500 employee deferral (2026) on top of the same percentage-of-profit employer contribution the SEP allows. Both plans share the same overall ceiling of $72,000 for 2026. The SEP's advantages are simplicity and a forgiving deadline: you can open and fund one all the way up to your filing deadline.
Retirement contributions are the single biggest deduction most successful freelancers leave on the table — they headline our pillar on deductions self-employed people actually miss. This post compares the two plans head-to-head: contribution math with a worked example, Roth and loan features, deadlines, and a plain rule for choosing. (If you have employees beyond a spouse, different rules apply — see our guide to small business retirement plans instead.)
For 2026, total contributions to either plan max out at $72,000 (the defined-contribution limit). How you climb to it differs:
That second lever is the whole story. At very high incomes, the percentage contribution alone reaches $72,000 and the plans tie. At the incomes where most freelancers actually live, the deferral is the difference between a decent contribution and a great one.
Take a freelancer with $80,000 of net self-employment profit in 2026. After deducting half her self-employment tax, her effective employer-contribution base allows roughly 20% of adjusted profit — call it about $14,900 either way. Now compare:
If she's 50 or older, the catch-up pushes the solo 401(k) past $47,000 while the SEP stays parked at $14,900. Every one of those dollars (in the traditional variant) is deducted from income before tax — stack it with the self-employed health insurance deduction and you can strip tens of thousands off taxable income above the line, which also shrinks the quarterly estimates we walk through in our first-year freelancer guide to quarterly taxes.
One housekeeping note: once a solo 401(k) balance passes $250,000, you file a short annual information return (Form 5500-EZ). Not hard, just don't forget it.
The SEP IRA's pitch is friction-free saving. Opening one takes minutes at any major brokerage, there's no plan document to maintain beyond the basics, no separate annual filing at any balance, and contributions are one simple percentage decision. If your profit is high enough that 20% of it approaches the cap anyway — or you genuinely will not deal with any paperwork — the SEP delivers most of the benefit for none of the administration. It's also a fine "oops" plan, for reasons the next section makes clear.
This is where freelancers get burned. A solo 401(k) must be established by December 31 for you to make employee deferrals for that year — the deferral election needs to exist before the year ends. Sign up in March and you've lost the $24,500 lever for last year. A SEP can be opened and funded all the way up to your filing deadline, including extensions — so in April (or on extension, October) you can still open a SEP and deduct a contribution for the prior year.
So the calendar writes the strategy: planning ahead in the fall, open the solo 401(k) before year-end. Sitting on last year's surprise profit in March, open the SEP, take the deduction, and set up the solo 401(k) for the current year while you're at it.
Open the solo 401(k) by December 31. The SEP is the escape hatch for the year you didn't.
Neither plan requires a lawyer. Every major brokerage offers a free solo 401(k) with a prototype plan document — you'll sign an adoption agreement, get an employer identification number for the plan if you don't have one, and make a written deferral election before December 31. Contributions themselves can then be made up to your filing deadline, including extensions; it's the plan's existence and the deferral election that must beat year-end. A SEP is even lighter: complete the one-page Form 5305-SEP (the brokerage handles it), open the account, and fund it. If you want Roth deferrals or loan provisions, confirm your provider's document supports them before you open the account — the features are legal, but not every free prototype includes them.
Both plans reach $72,000 for 2026, but the solo 401(k)'s $24,500 employee deferral makes it the clear winner at the incomes most freelancers earn — the SEP's edge is simplicity and its file-time deadline. The expensive mistake isn't picking the wrong plan; it's picking neither and donating the deduction back to the IRS. Taxagon's tax planning team runs the contribution math and deadline calendar for self-employed clients every fall — if you'd rather not navigate it alone, reach out.
This article is general information, not tax advice for your specific situation. Tax law changes; figures are for the years stated.
Talk it through with a licensed US tax professional — we'll tell you honestly whether it applies to your situation.
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