Can You Have a Solo 401(k) and a SEP IRA: Limits and Deadlines

Yes, you can have a Solo 401k and a SEP IRA at the same time. No federal rule blocks it. What most people miss is that the two plans share a single annual contribution ceiling under Internal Revenue Code Section 415(c), set at $72,000 for 2026, and every dollar you put into the SEP IRA reduces what your business can contribute to the employer side of the Solo 401k.¹ So the practical question is not whether you can hold both accounts, but whether doing so gets you anything a single plan wouldn’t.

How the Two Plans Fit Together

A Solo 401k takes two kinds of contributions: employee elective deferrals from your own pay, and employer profit-sharing contributions from the business. A SEP IRA takes only employer contributions. That one difference drives everything else.

Your employee deferrals into the Solo 401k sit in their own bucket. A SEP IRA deposit does not touch them. But because a SEP contribution is an employer contribution, it competes directly with the employer profit-sharing side of the Solo 401k for space under the shared $72,000 cap. The IRS itself lists a SEP IRA among the alternatives to a one-participant 401k plan, which reflects how commonly business owners weigh the two.²

2026 Contribution Limits

The numbers that matter for 2026:³

If you are self-employed rather than a W-2 employee of your own corporation, the effective employer contribution rate is closer to 20% of net self-employment income, not 25%. You must subtract the deductible half of your self-employment tax from net earnings before applying the statutory rate, which reduces the effective percentage.

How the Contributions Actually Compete

Take a self-employed consultant with $200,000 in net self-employment income (after the SE tax deduction) who wants to fund both plans. The math looks like this:

Solo 401k employee deferral: $24,500
SEP IRA employer contribution at 10% of compensation: $20,000
Room left for Solo 401k employer contribution under the $72,000 cap: $72,000 − $24,500 − $20,000 = $27,500

But there is a second ceiling. Total employer-side contributions across both plans cannot exceed 25% of compensation, or roughly 20% of net SE income for unincorporated businesses. For this consultant, 20% of $200,000 is $40,000 of total employer contributions. After the $20,000 SEP deposit, only $20,000 remains for the Solo 401k profit-sharing side, not the $27,500 the dollar cap alone would allow. The tighter of the two limits wins.

This is why running both plans rarely produces more total savings than a well-funded Solo 401k on its own. The usual reasons to keep both are administrative: a legacy SEP you don’t want to close, different investment platforms for different money, or a transition period between plans.

Catch-Up Contributions Only Live in the Solo 401k

The SEP IRA has no catch-up provision. If you are 50 or older, the standard 2026 catch-up of $8,000 is available only through the Solo 401k, pushing your personal ceiling to $80,000.¹ Catch-up amounts sit on top of the $72,000 annual addition limit rather than counting against it.⁵

Under SECURE 2.0, if you turn 60, 61, 62, or 63 during the tax year, the catch-up jumps to $11,250 for 2026, replacing the standard $8,000 for those specific ages.¹ A 62-year-old solo business owner could put in as much as $83,250 across both plans. Once you turn 64, the amount drops back to the standard $8,000.

Setup and Funding Deadlines Differ

Timing is one place where the two plans behave differently, and it matters if you are deciding late in the year.

For a Solo 401k, you must elect your employee deferrals by December 31 of the tax year. The plan itself generally has to be established by December 31 to allow employee deferrals for that year. You can fund both the employee deferrals and the employer profit-sharing contributions up to your tax filing deadline including extensions, so a sole proprietor on extension can fund the employer piece as late as October 15 of the following year.

A SEP IRA is more forgiving on setup. You can open and fund a SEP IRA up to the due date of your return including extensions.⁶ If December 31 has already passed and you did not have a Solo 401k in place, a SEP IRA lets you still make a full employer contribution for the prior year the following spring. That flexibility is one of the SEP’s real advantages, and one reason someone might carry both plans into a following tax year.

If You Own More Than One Business, Read This

You cannot sidestep the shared cap by putting a SEP IRA in one business and a Solo 401k in another. Sections 414(b) and (c) of the Internal Revenue Code require the IRS to treat commonly owned businesses as a single employer for retirement plan purposes.⁷ The $72,000 cap applies across every entity you control.

Two controlled group structures catch owners off guard:

Section 414(m) reaches further. If your businesses collaborate to deliver services, share management, or support each other, affiliated service group rules can aggregate them even when the ownership math alone wouldn’t.⁷ Getting this wrong can disqualify the plans, which triggers immediate taxation of the assets.

When Employees Change the Picture

A Solo 401k is only available to businesses with no common-law employees other than the owner and the owner’s spouse. The IRS generally treats anyone working more than 1,000 hours in a year as an eligible employee who must be covered.² Hire someone who crosses that line and the Solo 401k is no longer available; you either convert to a standard 401k with nondiscrimination testing or terminate the plan.

SECURE 2.0 lowered the bar further. For plan years after December 31, 2024, employees who work at least 500 hours in two consecutive years become eligible. A part-time assistant with 600 hours in both 2024 and 2025 would need to be offered participation starting January 1, 2026.

The SEP IRA handles employees differently but has its own cost. If you contribute to your own SEP IRA, you must contribute the same percentage of compensation for every eligible employee.⁶ An employee who is at least 21, has worked for you in three of the past five years, and earned at least $750 in 2026 generally qualifies. The proportional-contribution rule can make the SEP expensive once you have staff, which is why growing businesses often move to a standard 401k where the formulas are more flexible.

When Running Both Plans Is Worth the Trouble

Because the shared cap and the percentage ceiling limit what you can add on the employer side, holding both plans usually will not raise your total contribution above what a Solo 401k could deliver on its own. It can still make sense if you are transitioning from a SEP IRA to a Solo 401k and want to run them in parallel for a year, if a custodian offers investment options in one account that you can’t get in the other, or if you missed the December 31 Solo 401k setup deadline and need the SEP as a backstop for the prior year’s contribution.

Track contributions across both accounts throughout the year rather than reconciling at tax time. An overage discovered in April is expensive to unwind, and once excess amounts sit in a SEP IRA they attract a 6% excise tax under IRC Section 4973 for every year they remain in the account.⁹

1
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living Notice 2025-67
2
Internal Revenue Service. One-Participant 401(k) Plans
3
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
4
Internal Revenue Service. SEP Contribution Limits (Including Grandfathered SARSEPs)
5
eCFR. 26 CFR 1.415(c)-1 Limitations for Defined Contribution Plans
6
Internal Revenue Service. Retirement Plans FAQs Regarding SEPs
7
Office of the Law Revision Counsel. 26 USC 414 – Definitions and Special Rules
8
eCFR. 26 CFR 1.1563-1 – Definition of Controlled Group of Corporations and Component Members and Related Concepts
9
Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities