SEP IRA Contribution Limit 2026
Current year
For 2026, the SEP IRA Contribution Limit is $72,000 (Defined contribution limit), $800 (Compensation threshold) and 25% (Share of employee compensation).
Effective 2026-01-01Source: Notice 2025-67 (IRS)Verified 2026-08-29
Share of employee compensationSource: SEP contribution limits (including grandfathered SARSEPs) (IRS)Verified 2026-08-29
Compared with 2025
| Item | 2025 | 2026 | Change |
|---|---|---|---|
| Defined contribution limit | $70,000 | $72,000 | +$2,000 (+2.9%) |
| Compensation threshold | $750 | $800 | +$50 (+6.7%) |
| Share of employee compensation | 25% | 25% | +0% (+0.0%) |
Who it applies to
Two different amounts in the same notice, with two different reaches. The $72,000 is the limitation for defined contribution plans under section 415, which the notice states for defined contribution plans generally rather than for simplified employee pensions alone, so the same ceiling is the one other defined contribution arrangements are measured against. The $800 is the compensation threshold under section 408(k) regarding simplified employee pensions, and it is the only figure in the notice that names simplified employee pensions on its own. Notice 2025-67 also adjusts an annual compensation limitation that section 408(k) applies to these plans, but that is a third amount, stated separately and not equal to either of these. Each is published as its own figure under its own provision.
What changed this year, and why
For 2026 the limitation for defined contribution plans under section 415 is increased from $70,000 to $72,000, and the compensation threshold under section 408(k) regarding simplified employee pensions is increased from $750 to $800. Both of the amounts in the notice that bear on a simplified employee pension moved this year, which is a change of pattern: the compensation threshold had stayed at $750 for 2025. Notice 2025-67 publishes the adjusted figures themselves; the rules they feed sit in the Code provisions it cites.
Common questions
- What is the maximum SEP IRA contribution for 2026?
- For 2026 the limitation for defined contribution plans under section 415 is $72,000. Notice 2025-67 states it as one figure covering defined contribution plans, so it is not a SEP-only number: other defined contribution arrangements are measured against the same limitation. The notice records it as increased from $70,000, and it does not vary the amount by employer size or by type of employer.
- How much did the SEP IRA limit go up for 2026?
- Notice 2025-67 states the limitation for defined contribution plans under section 415 as increased from $70,000 to $72,000, and the compensation threshold under section 408(k) regarding simplified employee pensions as increased from $750 to $800. Both moved for 2026, where for 2025 the compensation threshold had held at $750. The notice gives the endpoints after applying its rounding rules.
- What is the $800 SEP IRA compensation threshold for 2026?
- Notice 2025-67 states that the compensation threshold under section 408(k) regarding simplified employee pensions is increased from $750 to $800 for 2026. That is the whole of what the notice says about it: it publishes the adjusted amount and names the Code provision the amount belongs to, without restating the rule that provision applies it to.
- Is the $72,000 limit specific to SEP IRAs?
- No. Notice 2025-67 states $72,000 as the limitation for defined contribution plans under section 415, a provision covering defined contribution plans in general rather than simplified employee pensions alone. The notice's SEP-specific figure is the separate compensation threshold under section 408(k), which is $800 for 2026. Reading the $72,000 as a SEP-only ceiling mistakes which provision it comes from.
- Is there a catch-up contribution for a SEP IRA?
- Notice 2025-67 lists catch-up limitations under section 414 for catch-up contributions to an applicable employer plan, including plans described in section 401(k) and in section 408(p). It states no catch-up amount for simplified employee pensions. The only figure in the notice that names simplified employee pensions is the compensation threshold under section 408(k), at $800 for 2026.
- Is compensation capped when a SEP IRA contribution is worked out?
- Notice 2025-67 adjusts an annual compensation limitation that section 408(k) applies to simplified employee pensions, and it states that limitation as its own amount for 2026, separate from the $72,000 defined contribution limitation and from the $800 compensation threshold. The notice publishes the three as distinct figures under distinct provisions rather than folding them into one SEP calculation.
- Does the SEP IRA limit interact with a workplace salary deferral limit?
- Notice 2025-67 states the limitation on the exclusion for elective deferrals under section 402 as its own amount for 2026, listed apart from the $72,000 limitation for defined contribution plans under section 415. The notice presents them as separate limitations, under separate provisions, adjusted separately. It states no combined figure covering both.
- Where does the 2026 SEP IRA limit come from?
- Notice 2025-67, titled 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living. Section 415 requires the Secretary of the Treasury to adjust these limitations annually for cost-of-living increases, and the notice publishes the result once the rounding rules have been applied. The $72,000 defined contribution limitation and the $800 compensation threshold both appear there.
Every amount on this page is a published figure rather than yours. The SEP-IRA contribution limit calculator takes the number you enter and works it out against them, showing which published figure it used.
The 25% of compensation ceiling
The dollar limit this page publishes is only one of the two ceilings on a SEP contribution, and for most people it is not the one that binds. A contribution made for a common-law employee cannot exceed 25% of that employee’s compensation, and anything above the lesser of the two ceilings is an excess contribution. Publication 560 states the test from that direction: a contribution is excessive once it passes 25% of compensation or, for the owner contributing for themselves, 20% of net earnings from self-employment. The two percentages are one rule seen from two sides, because a self-employed person’s own contribution reduces the net earnings the percentage is applied to. A sole proprietor therefore reaches the dollar limit for the year, $72,000, only on a very large profit; below that the percentage decides the number, and the dollar limit never comes into it.
Excess contri- butions are your contributions to an employee's SEP IRA (or to your own SEP IRA) for 2025 that exceed the lesser of the following amounts. • 25% of the employee's compensation (or, for you, 20% of your net earnings from self-employment).
Publication 560 (2025), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
How much of the contribution you can deduct
Making a contribution and deducting it are two separate tests, and the deduction has a ceiling of its own. An employer may deduct the lesser of what it actually contributed and 25% of the compensation paid to the participants by the business that maintains the plan. The compensation counted for each participant is itself capped, at $350,000 in the edition quoted here, and no participant's deduction may exceed the annual dollar limit of $72,000. A contribution above the deduction limit is not lost: the excess can be carried over and deducted in a later year, subject to that year’s own limit. This is why the amount contributed and the amount deducted for the same plan year can differ on a return.
The most you can deduct for your contributions to your or your employee's SEP IRA is the lesser of the following amounts. 1. Your contributions (including any excess contributions carryover). 2. 25% of the compensation (limited to $350,000 per participant) paid to the participants during 2025, from the business that has the plan
Publication 560 (2025), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
For a self-employed person, compensation is net earnings
When a self-employed person contributes to their own SEP IRA, calculating the deduction requires a special computation because compensation is defined as net earnings from self-employment, which already takes into account two key deductions: the deductible portion of self-employment tax, and the deduction for the SEP contributions themselves. These two deductions are interdependent because the amount of the SEP contribution deduction affects net earnings, which in turn affects the compensation figure used to calculate the contribution limit. To resolve this circular calculation, the deduction is determined indirectly by reducing the contribution rate specified in the plan document. The self-employed person uses either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, depending on the plan's contribution rate, to calculate the adjusted rate. Then the Deduction Worksheet for Self-Employed is used to figure the maximum deduction amount. This special computation ensures that the contribution and deduction are calculated correctly when compensation includes the contribution itself.
Deduction Limit for Self-Employed Individuals If you contribute to your own SEP IRA, you must make a special computation to figure your maximum deduction for these contributions. When figuring the deduction for con- tributions made to your own SEP IRA, compensation is your net earnings from self-employment (defined in chap- ter 1), which takes into account both the following deduc- tions. • The deduction for the deductible part of your self-em- ployment tax. • The deduction for contributions to your own SEP IRA.
Publication 560 (2025), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
A self-employed person uses a reduced contribution rate
Because the deduction for SEP contributions to a self-employed person's own account and their net earnings from self-employment are interdependent, the deduction cannot be calculated directly using the plan's stated contribution rate. Instead, the self-employed individual must determine the deduction indirectly by reducing the contribution rate called for in the plan. This adjusted rate accounts for the fact that the contribution itself reduces net earnings, which is the compensation base used to figure the contribution limit. To apply the reduced rate, the self-employed person uses either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, whichever matches their plan's contribution rate. These tables and worksheets are provided in chapter 5 of the publication. After calculating the adjusted contribution using the reduced rate, the self-employed person then uses the Deduction Worksheet for Self-Employed to figure their maximum deduction. This indirect method ensures that both the contribution amount and the corresponding deduction are calculated correctly given the circular relationship between contributions and net earnings.
The deduction for contributions to your own SEP IRA and your net earnings depend on each other. For this rea- son, you determine the deduction for contributions to your own SEP IRA indirectly by reducing the contribution rate called for in your plan.
Publication 560 (2025), Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Notice 2025-67 (IRS)
- Defined contribution limit
The limitation for defined contribution plans under section 415(c)(1)(A) is increased in 2026 from $70,000 to $72,000.
- Compensation threshold
The compensation threshold under section 408(k)(2)(C) regarding simplified employee pensions is increased from $750 to $800.
SEP contribution limits (including grandfathered SARSEPs) (IRS)
Contributions an employer can make to an employee's SEP-IRA cannot exceed the lesser of: 25% of the employee's compensation, or $72,000 for 2026, subject to cost-of-living adjustments
By year
Every published year
11 years on record, 2026 back to 2016. Each year links to its own page, its own document and its own verification date.