Retirement Contribution Deduction

Average Value: $10,000 - $69,000

Self-employed retirement contributions offer massive tax savings. Solo 401(k) allows up to $70,000 in annual contributions (2026). SEP IRAs allow 25% of net self-employment earnings. These deductions reduce both income tax and may impact SE tax calculations.

Requirements

Must have net self-employment income
Solo 401(k): Must establish by Dec 31, contributions by tax deadline
SEP IRA: Can establish and contribute by tax deadline (including extensions)
Contribution limits based on net SE income after SE tax adjustment

How to Claim

1Calculate net self-employment income
2Subtract half of SE tax for contribution base
3Solo 401(k): $23,000 employee + 25% employer = up to $69,000
4SEP IRA: 25% of adjusted net earnings, max $69,000
5Report on Schedule 1, Line 16 (SEP, SIMPLE) or 15 (Solo 401k)

Common Mistakes to Avoid

✗Missing Solo 401(k) setup deadline (Dec 31)
✗Calculating contribution on gross instead of net income
✗Not adjusting net income for SE tax deduction
✗Over-contributing based on incorrect calculation

How AlphaTax Helps

AlphaTax's Retirement Optimizer calculates your exact contribution limits in real-time, compares all options, and shows dollar-for-dollar tax savings at your income level.

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Related AlphaTax Features

Retirement Optimizer

SEP IRA vs Solo 401k vs Traditional vs Roth

Frequently Asked Questions

Solo 401(k) vs SEP IRA—which is better?

Solo 401(k) allows higher contributions at lower income levels and offers a Roth option. SEP IRA is simpler to administer and can be set up later.

Can I contribute if I also have a W-2 job?

Yes, but your employee contribution limit ($23,000) is shared across all 401(k)s. Your self-employed employer contribution is separate.