Updated October 1, 2026. Quick answer: The 2026 SEP IRA limit is the lesser of 25% of an employee’s compensation or $72,000. No more than $360,000 of an employee’s pay counts, so the dollar cap binds once compensation passes $288,000. For yourself as a self-employed owner the percentage is figured on net earnings.
Related reading on this site: IRS Publication 560.
More IRS forms and schedules, read line by line: Form 5305-SEP instructions and Form 5304-SIMPLE instructions.
IRS worksheets from the 2025 Form 1040 instructions, read line by line: Self-Employed Health Insurance Deduction Worksheet and IRA Deduction Worksheet.
Related reading on this site: IRA contribution deadline 2026 and solo 401(k) contribution deadline 2026.
More IRS forms and schedules, read line by line: Form 8888 instructions.
The solo 401(k) comparison: the 2026 solo 401(k) limits.
2026 SEP IRA limits
| Item | 2026 figure | Source |
|---|---|---|
| Maximum employer contribution per employee | $72,000 | Notice 2025-67 |
| Compensation counted per employee | $360,000 | Notice 2025-67 |
| Share of compensation | 25% | Publication 560 |
| Compensation needed to reach $72,000 | $288,000 | Computed here |
| Compensation threshold for SEP coverage (section 408(k)(2)(C)) | $800 | Notice 2025-67 |
Publication 560 states the rule as “Contributions you make for 2025 to a common-law employee’s SEP IRA can’t exceed the lesser of 25% of the employee’s compensation or $70,000.” It adds that the dollar limits “increase to $360,000 and $72,000, respectively, in 2026.”
Worked examples
An employee paid $100,000 can receive up to $25,000 from the employer. An employee paid $400,000 counts only the first $360,000, and 25% of that is $90,000, so the $72,000 cap applies. Both examples are computed here and are not IRS examples.
If you are the self-employed owner
Publication 560 says the excess-contribution test for you uses “20% of your net earnings from self-employment”. The deduction for your own contribution involves a separate computation, because it depends on the self-employment tax deduction and on the contribution itself.
Which plans share the limit
A SEP counts as a defined contribution plan for the overall limit. Publication 560 says “your contributions to a SEP must be added to your contributions to other defined contribution plans you maintain.”
Common mistakes
- Using the 401(k) employee limit of $24,500. A SEP is funded by the employer, with a different limit.
- Applying 25% to pay above $360,000. Only the first $360,000 counts.
- Using the same percentage for yourself as for employees. The owner’s rate is figured on net earnings.
- Forgetting that a SEP counts toward the overall defined contribution limit when you also have another plan.
Related: the 2027 SEP IRA page, the SIMPLE IRA limit page, and the 2026 retirement numbers hub.
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Answer againSources
- IRS Notice 2025-67, 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living: https://www.irs.gov/pub/irs-drop/n-25-67.pdf
- IRS Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans): https://www.irs.gov/publications/p560
Sources: the primary documents linked above, read on October 1, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.