2026 Tax Benefits at a Glance

  • Immediate deduction: For 2026 you can deduct up to $72,000, or 25% of eligible compensation, whichever is less, for SEP contributions.
  • Tax deferred growth: Earnings inside the SEP IRA aren't taxed until you withdraw in retirement.
  • SEP contributions are employer contributions only. There is no employee deferral and no age-50 catch-up in a SEP, which is one reason a Solo 401(k) sometimes beats it at the same income.
  • A SEP IRA balance counts in the pro-rata math if you also do backdoor Roth contributions; many clients use a Solo 401(k) instead, or roll the SEP into a 401(k), to keep the backdoor clean. Ask us before year-end.

Separate from your 401(k): These employer funded contributions don't use up your personal 401(k) salary deferral limit, so a W2 401(k) and a SEP can coexist.

Disclaimer: Educational account opening steps only not personalized financial or legal advice and not a complete description of SEP IRA rules. Consult your own brokerage adviser before acting.

Step 1: Open your plan

Pick a brokerage you like (e.g., Fidelity, Vanguard, Schwab) and follow its online "SEP IRA" setup.

Fidelity's walkthrough for example: https://www.fidelity.com/retirement-ira/small-business/sep-ira

Why it matters: This creates the required plan document (IRS Form 5305-SEP) and the brokerage account where your funds will live.

Step 2: Contribute to your plan

Move money from your business account to the SEP IRA by your tax return deadline (including extensions). ACH, transfer, or check all work. Check with Doc Wealth to verify the amounts you may contribute each year based on income.

As mentioned above, for 2026, the contribution is limited to the lesser of $72,000 or 25% of eligible compensation (compensation above $360,000 does not count). For Schedule C clients, the self-employment adjustments work out to roughly 20% of net profit, so a quick estimate is net profit times 20%; we compute the exact number with your return. If a sole proprietor / Schedule C, your eligible compensation for purposes of a SEP contribution would be your net earnings from self employment, adjusted for the self employment tax deduction and the SEP contribution itself. Because you won't know the exact amount of earnings from self employment until your Schedule C is finalized, it is not uncommon to wait until your tax return is completed before making a SEP contribution for that tax year.

If your business has employees, a SEP generally must cover the eligible ones at the same contribution percentage you give yourself. Talk to us before adopting one if you have (or plan to hire) staff.

Step 3: Maintain your plan

  • Invest the cash however you prefer self direct into index funds, ETFs, etc., or hire an investment professional; that choice is yours.
  • Review yearly to add new contributions or rebalance as needed.
  • Keep copies of all plan documents and contribution receipts.

That's it: open, contribute, maintain and enjoy the built in 2026 tax break. For full details or employee rules, see your contact brokerage for details.