SEP IRA or Solo 401(k), Which Retirement Plan Cuts My Tax Bill the Most This Year?
Your biggest tax deduction isn’t a loophole — it’s choosing the right plan. Solo 401(k) often cuts more this year; SEP gives deadline flexibility.
Summary of What This Blog Covers
- Side-by-side SEP IRA vs Solo 401(k) for 2025
- Limits, deadlines, Roth options, S Corp/sole-prop nuances
- Step-by-step funding calendar + cash-flow impact
The 2025 Quick Verdict
Solo 401(k) = $23,500 employee deferral + employer dollars → usually bigger deduction this year.
SEP IRA = employer-only → fundable by filing deadline.
Contribution Limits (2025)
Solo 401(k): $23,500 deferral + up to 25% employer → $70,000 max.
SEP IRA: Up to 25% employer → $70,000 max.
Deadlines & Setup
Solo 401(k): Establish by 12/31, deferrals by payroll, employer by filing.
SEP IRA: Establish & fund by filing deadline (extensions OK).
Quick Math Examples
$150k profit, $60k salary → Solo 401(k) ~$52k total vs SEP ~$37.5k. Solo wins ~$14.5k deduction.
When Solo 401(k) Wins
Higher profit, can run payroll, want Roth, backdoor Roth friendly.
When SEP IRA Wins
Late in year, missed payroll setup, simpler admin, no employees.
Roth Options
Solo 401(k) = Roth deferrals available. SEP = traditional only.
Your Funding Checklist (copy-paste)
☐ Choose plan (Solo 401(k)/SEP)
☐ Establish Solo 401(k) by 12/31 if needed
☐ Run payroll deferrals
☐ Schedule employer contribution
☐ Document salary if S Corp
☐ Fund by deadline
Book Your Plan Strategy
Insogna models SEP vs Solo 401(k) for your exact profit, sets deadlines, provides paperwork, and coordinates payroll. Whether you searched “tax preparer near me for retirement plans,” “Austin Texas CPA for Solo 401k,” or “SEP IRA planning,” we make the biggest deduction happen this year.
Frequently Asked Questions
1) Can I have both plans?
No — limits are combined. Choose one.
2) Solo 401(k) with no employees?
Perfect for owner-only businesses.
3) Roth Solo 401(k) worth it?
Lower bracket now → Roth. Higher → traditional.
4) S Corp salary impact?
Salary fuels deferral. Higher reasonable salary = bigger total in Solo 401(k).
5) Backdoor Roth conflict?
SEP counts in pro-rata rule. Solo 401(k) does not.
