Can you fund a SEP-IRA and a solo 401(k) in the same year?

Yes. But they share one ceiling, and most people who try it double count.

ExactSplit · Updated April 18, 2026

The short answer, and the catch

You can have a SEP-IRA and a solo 401(k) open at the same time, and you can contribute to both in the same year. Nothing in the rules prevents it. What the rules do prevent is adding the two limits together as if they were independent. They are not, and the reason is that both accounts are plans maintained by the same employer, which is you.

This is a case where the mechanics are simple once you see them, but the intuition most people bring to it is wrong. The intuition is that each account has its own limit. The reality is that the limits attach to the employer, not to the account.

Employer contributions share a single pool

A SEP contribution is an employer contribution. The employer side of a solo 401(k), the profit sharing piece, is also an employer contribution. Both are subject to the same 25 percent of compensation limit under section 404, which for a self-employed person works out to 20 percent of net earnings after the half SE tax deduction. That is one limit, and both accounts draw from it.

If your 20 percent figure is 18,587 dollars, that is the total employer contribution you can make across the SEP and the solo 401(k) combined. It is not 18,587 dollars into each. Putting 18,587 into the SEP and another 18,587 into the 401(k) is an excess contribution of 18,587 dollars, and excess contributions carry a 10 percent excise tax under section 4972 for every year they stay in.

Both accounts also share the section 415(c) annual additions limit, 72,000 dollars for 2026. Everything contributed to all defined contribution plans of the same employer in a year, employee and employer side together, has to fit under that ceiling. Catch-up contributions sit outside it, but nothing else does.

What the solo 401(k) adds that the SEP cannot

There is one thing a solo 401(k) can do that a SEP simply has no mechanism for. It accepts employee elective deferrals. A SEP does not. SEPs are employer-only plans by design. The old SARSEP arrangements that allowed salary deferrals were closed to new plans in 1997, and a SEP established today cannot accept a deferral.

The deferral limit for 2026 is 24,500 dollars under section 402(g), per Notice 2025-67. Add the catch-up if you qualify, 8,000 dollars at age 50 or 11,250 dollars if you turn 60 through 63 during the year. That deferral is on top of the shared employer contribution, not in place of it.

This is why a solo 401(k) beats a SEP for most one-person businesses at moderate income. At 100,000 dollars of net profit, a SEP allows about 18,587 dollars. A solo 401(k) allows that same 18,587 as an employer contribution plus 24,500 as a deferral, for 43,087 dollars. The SEP cannot get anywhere near that number because it has no deferral side.

So why would anyone have both

The honest answer is that most people who have both did not plan it. They opened a SEP early because it takes five minutes and no paperwork, contributed to it for a few years, then opened a solo 401(k) later when they learned about the deferral. Now they have two accounts and are not sure what to do.

There are a couple of legitimate reasons to keep both. Some people prefer the SEP's simplicity for the employer contribution and only use the 401(k) for deferrals. Some have a SEP with a broker they like and do not want to move the balance. Neither is a tax reason, but neither is wrong.

What you should not do is think of the SEP as a way to get a second employer contribution. It is the same contribution, split across two accounts. If you contribute the full 20 percent to the 401(k), there is nothing left to put in the SEP.

The timing difference, which is real

There is one practical difference between the accounts that is worth knowing, and it concerns deadlines rather than limits.

A SEP can be established and funded as late as the due date of your return, including extensions. If you realize in September that you should have contributed for the prior year, you can still open a SEP and fund it, provided you filed an extension. The solo 401(k) employer contribution has the same deadline. Employer contributions are deductible for a year if they are made by the return due date including extensions.

The employee deferral is different. For a sole proprietor, the deferral election has to be in place by the last day of the tax year, because your compensation is treated as paid on December 31. You can make the actual deposit later, but the election to defer has to exist before the year ends. A plan adopted for its first year may have more room under SECURE 2.0, but that is a question for your plan administrator and not something to rely on without checking.

So the deferral is the piece with a hard December 31 deadline. Everything else can wait until you file.

A worked example with both accounts

Say you have 120,000 dollars of net profit, you are 45, and you already put 10,000 dollars into a SEP in March. Net earnings after half SE tax are about 111,522 dollars. Twenty percent of that is 22,304 dollars. That is your total employer room for the year across both accounts.

You have used 10,000 of it in the SEP. You can put up to 12,304 more into the solo 401(k) as an employer contribution. Not 22,304. The SEP contribution counts against the same pool.

Separately, you can defer up to 24,500 dollars into the 401(k) as an employee. That is independent of the SEP entirely. Your total for the year would be 10,000 plus 12,304 plus 24,500, which is 46,804 dollars. Check it against 415(c): 46,804 is under 72,000, so the annual additions cap does not bind. Everything fits.

How ExactSplit handles it

ExactSplit tracks the SEP contribution and both sides of the solo 401(k) as separate inputs, computes the 20 percent employer ceiling once, and applies it to the SEP and the 401(k) employer contribution together. If you enter more than the ceiling across the two, it tells you and allocates the allowed amount proportionally so the per-account figures still add up.

The contribution optimizer shows the room in each account, but it will not let you add the SEP and the 401(k) employer room together, because that room is shared. The combined figure it shows is the real one, and it notes explicitly that the two employer options are alternatives rather than additions.