Solo 401(k) vs SEP IRA: the 2026 side-by-side
Same $72,000 cap, same employer formula, very different route. One extra line — the $24,500 employee deferral — decides it for most people, and one rule about employees decides it for the rest. Applications for both are open at Gigaverse.
Side by side
2026 figures. Approximations are marked.
| Feature | Solo 401(k) | SEP IRA |
|---|---|---|
| Employee deferral | $24,500 (+$8,000 at 50+) | None. Employer money only. |
| Employer share | ≈20% of net self-employment earnings, or 25% of W-2 comp | ≈20% of net self-employment earnings, or 25% of W-2 comp |
| Total 2026 cap | $72,000 ($80,000 at 50+) | $72,000 |
| Roth option | Yes, on the employee deferral, with no income phase-out | Pre-tax at Gigaverse |
| Plan loans | Permitted, up to the lesser of $50,000 or 50% of the balance | No. An IRA cannot lend to you. |
| Deadline | Deferral elected by Dec 31; employer contribution by the filing deadline including extensions | Open and fund by the filing deadline including extensions |
| Admin burden | Plan document to adopt; Form 5500-EZ once assets pass $250,000 | A one-page adoption form. No 5500-EZ at any asset level. |
| Employees | Only you and a spouse. A non-spouse eligible employee ends the “solo” plan. | Works with employees, but you must fund the same percentage of pay for each eligible one |
Pick a Solo 401(k) if…
- • You want to contribute more than about 20% of net. Below roughly $250k of net income the $24,500 deferral is the whole difference between the two plans; above that the $72,000 cap starts to absorb it.
- • You want Roth treatment on part of your contribution. A Roth deferral inside a 401(k) has no income phase-out, so it is the usual route to Roth dollars once the Roth IRA closes above $168,000 single or $252,000 married filing jointly.
- • You might want a plan loan. A Solo 401(k) can permit one; an IRA cannot.
- • Your income is uneven and you want the deferral to do the work in a thin year, when 20% of a small profit would be almost nothing.
Pick a SEP IRA if…
- • You have or expect eligible employees. A Solo 401(k) stops being solo once a non-spouse employee qualifies; a SEP keeps working, at the cost of funding the same percentage for them.
- • You missed December 31 and want to fund last year. A SEP can be opened and funded up to your filing deadline including extensions — the single most useful thing about it.
- • You want the least paperwork that still moves real money. No plan document to maintain, no Form 5500-EZ at any asset level.
- • You net roughly $375,000 or more, where ≈20% alone reaches the $72,000 cap and the deferral buys you nothing extra.
Worked examples: $100k, $150k, $250k
Sole proprietor, under 50, 2026 limits. Net profit × 0.9235 gives the self-employment tax base; net profit minus half that tax is the contribution basis; the employer contribution is about 20% of the basis. The Solo 401(k) column adds the $24,500 deferral on top, capped at $72,000. The SEP column is the employer contribution alone.
| Net profit | SE tax | Basis | Employer ≈20% | Solo 401(k) total | SEP IRA |
|---|---|---|---|---|---|
| $100,000 | ≈ $14,100 | ≈ $92,900 | ≈ $18,600 | ≈ $43,100 | ≈ $18,600 |
| $150,000 | ≈ $21,200 | ≈ $139,400 | ≈ $27,900 | ≈ $52,400 | ≈ $27,900 |
| $250,000 | ≈ $29,600 | ≈ $235,200 | ≈ $47,000 | ≈ $71,500 | ≈ $47,000 |
Approximations rounded to the nearest $100. At $250,000 the Social Security portion of self-employment tax is capped at the 2026 wage base, which is why the tax is not a straight 15.3%. At 50+ add the $8,000 catch-up to the Solo 401(k) column only. A Roth IRA, for scale, is $7,500 at every income shown and phases out entirely above $168,000 single or $252,000 married filing jointly. Not tax advice; confirm with your CPA or IRS Publication 560.
Common questions
Which lets me contribute more, a Solo 401(k) or a SEP IRA?
A Solo 401(k), at almost every income below about $375,000 of net profit, because the $24,500 employee deferral sits on top of the same roughly 20% employer share. At $150,000 of net self-employment income a Solo 401(k) allows around $52,400 against a SEP's $27,900 — an approximation, rounded. Above roughly $375,000 the employer share alone reaches the $72,000 cap and the two converge.
Can I have both a Solo 401(k) and a SEP IRA?
You can hold both accounts, but the $72,000 annual additions cap for 2026 applies across plans of the same business, so having two does not double your room. Where it can matter is genuinely separate, unrelated businesses — and that gets complicated fast under the controlled-group and affiliated-service-group rules. Talk to your CPA before assuming it works.
Is a SEP IRA cheaper to run?
Simpler, mainly. A SEP is adopted on a short form, has no plan document to maintain, and never requires Form 5500-EZ; a Solo 401(k) needs a plan document and a 5500-EZ once plan assets pass $250,000 at year end. At Gigaverse the subscription price is the same either way: Free $0, Pro $4.99/mo, Wealth Builder $9.99/mo. Any fee for the plan itself or from the custodian partner is confirmed in writing on your application before you sign.
Which one can I still open for last year?
The SEP. It can be established and funded up to your business tax filing deadline including extensions. A Solo 401(k) can be adopted by the filing deadline including extensions too, and for a sole proprietor's first plan year SECURE 2.0 §317 even allows retroactive employee deferrals if the plan is adopted by the return due date without extensions. In any later year the $24,500 deferral requires an election by December 31 and cannot be made retroactively.
Do both have income limits?
Neither has an income phase-out. That is the point of both relative to a Roth IRA, which is capped at $7,500 in 2026 ($8,600 at 50+) and phases out between $153,000 and $168,000 of modified AGI for single and head-of-household filers, $242,000 and $252,000 married filing jointly (IRS Notice 2025-67).
Can I switch later?
Generally yes. Plenty of people start with a SEP for simplicity and move to a Solo 401(k) once the deferral is worth the paperwork, and SEP balances can usually be rolled into a Solo 401(k) that accepts rollovers. The sequencing matters — particularly if you also do backdoor Roth conversions, where a SEP balance can trigger the pro-rata rule — so plan it with your CPA. Tell us on your application if you have an account to move.
Decided? Applications are open for both.
Apply, we confirm your eligibility and send your documents, then you fund before the deadline. Still torn — apply for the one you lean toward and say so in the notes; we will talk it through before anything is opened.
Disclosure: Gigaverse AI, Inc. is pursuing SEC registration as an investment adviser and is not currently registered. Nothing on this page is individualized investment, tax or legal advice. Limits and phase-outs are from IRS Notice 2025-67; the self-employed contribution method follows IRS Publication 560. All dollar figures other than the statutory limits are rounded approximations for a sole proprietor under age 50 and will differ from your return. Submitting an application does not open an account: eligibility is confirmed by a person and the account is established only after you review and sign. Accounts are held with a FINRA/SIPC-member broker-dealer custodian partner. Investing involves risk, including loss of principal. How we make money →