Solo 401(k) vs SEP-IRA 2026: Florida's $72K Tax Shelter Play

For Florida self-employed owners, 2026 just turned into the most generous retirement-planning year in a generation. The IRS's October 2025 inflation update pushed the Solo 401(k) total cap to $72,000, set the SEP-IRA ceiling at $72,000 to match, and lifted SIMPLE IRA elective deferrals to $17,000. For a Tampa consultant netting $200,000 a year, that converts into roughly $17,000 in immediate federal tax savings if every available dollar goes pre-tax — and Florida's zero-state-income-tax structure means none of it gets clawed back at the state level.

The catch is that the rules around timing, eligibility, and which plan to use have shifted. SECURE 2.0 added a "super catch-up" for ages 60 to 63. The Roth catch-up rule now forces certain high earners onto the Roth side. And new entity-formation deadlines mean a wrong move in May can cost you thousands in deductions you can't get back in April. Below is the 2026 playbook every Florida sole prop, single-member LLC, and S-corp owner should run before the next quarterly check goes out.

Why 2026 Is the Strongest Self-Employed Retirement Year on Record

Three forces are stacking on top of each other this year. First, inflation indexing did its work: contribution limits rose across every plan type the IRS sponsors for the self-employed. Second, OBBBA made the 20% Qualified Business Income deduction permanent, so retirement contributions don't accidentally clip your QBI in a way that disappears next year. Third, Florida's lack of a personal income tax means every federal deduction passes through to the bottom line at full strength — unlike California, where the state quietly takes back a slice.

Put together, a Florida pass-through owner in the 24% federal bracket who maxes a Solo 401(k) in 2026 turns $72,000 of business income into roughly $17,300 of immediate federal tax savings, plus QBI-eligible income left over on top. That is a rare situation in the U.S. tax code: a deduction that scales linearly, a state with no claw-back, and a planning rule that's now permanent.

What Changed for 2026

Here are the specific 2026 numbers every Florida self-employed owner should commit to memory before May ends:

Solo 401(k) employee deferral — $24,500 (up from $23,500 in 2025). Roth or pre-tax.

Solo 401(k) total cap — $72,000 across employee + employer profit-share (up from $70,000 in 2025).

Catch-up, age 50 to 59 or 64+ — Add $8,000.

Super catch-up, age 60 to 63 — Add $11,250 if your plan document permits it.

SEP-IRA — 25% of eligible compensation, capped at $72,000. Compensation considered is capped at $360,000.

SIMPLE IRA employee deferral — $17,000 ($21,000 with catch-up, age 50+).

Roth catch-up rule — Owners with W-2 wages above $145,000 in 2025 must make any 2026 catch-up as Roth (post-tax) contributions.

SEP-IRA: The Simple Path

The Simplified Employee Pension is the path of least resistance for a solo owner with no employees. You open a SEP-IRA at any major brokerage in roughly 15 minutes, contribute up to 25% of your net self-employment income (effectively about 20% after the SE-tax adjustment), and deduct the entire contribution on Schedule 1. There are no Form 5500 filings, no plan documents to update, and no annual nondiscrimination tests.

The trade-offs: SEP-IRAs are employer-only, so there's no separate $24,500 employee deferral. Catch-up contributions don't apply. There's no Roth option. And if you ever hire a part-time employee who works 3 of the last 5 years, you must contribute the same percentage of their pay that you contribute for yourself — which can become expensive fast.

Best fit: solo owners with no employees, who want low admin and don't need Roth or loan flexibility.

Solo 401(k): The Power Tool

The Solo 401(k) — also called a one-participant 401(k) — is the strongest plan available for owners with no employees other than a spouse. It splits contributions into two buckets that stack on top of each other: an employee deferral up to $24,500, and an employer profit-share up to 25% of net SE income. The combined cap is $72,000, but you can hit it on much lower income than a SEP-IRA requires.

To max a SEP-IRA at $72,000, you need roughly $360,000 of net self-employment income. To max a Solo 401(k) at $72,000, you need roughly $215,000 — because the first $24,500 of the deferral isn't tied to a percentage of compensation. For Florida owners earning between $50,000 and $250,000, the Solo 401(k) almost always wins.

Solo 401(k)s also offer Roth contributions on the employee-deferral side, plan loans up to $50,000 or 50% of vested balance (whichever is less), and a tax-free rollover on-ramp from a SEP or traditional IRA. The cost is mild administrative complexity: you'll need a written plan document from your custodian, and once total assets exceed $250,000 you'll file Form 5500-EZ annually.

SEP-IRA vs. Solo 401(k) vs. SIMPLE IRA at a Glance

The Florida Edge

Florida's structure rewards retirement savers more than almost any state. There's no state income tax, so the federal deduction is the entire deduction — a $50,000 Solo 401(k) contribution puts $50,000 against your taxable income at the federal level and zero state-tax leakage. A self-employed owner in Tallahassee versus the same owner in Atlanta, with identical numbers, comes out roughly $2,500 to $4,000 ahead per year on a maxed Solo 401(k) just because Florida doesn't tax the wages or the eventual Roth distributions.

The same dynamic applies to S-corp owner-employees. Your reasonable-comp W-2 wage forms the basis for your Solo 401(k) employee deferral and your employer profit share. Florida-resident S-corp owners with $150,000 of W-2 wages have unusually clean math — full federal deduction, no state nip, and QBI on the K-1 distributions remaining.

Deadlines That Matter for 2026

Solo 401(k) plan document — Must be adopted by December 31, 2026 to count for the 2026 tax year. Sole-prop owners gained limited extension flexibility under SECURE 2.0, but only the employer profit-share portion is broadly extendable; employee deferrals must be elected before year-end.

SEP-IRA — Most flexible deadline of any plan: it can be opened and funded as late as your 2026 tax filing deadline including extensions (October 15, 2027 for most filers).

SIMPLE IRA — Must be set up by October 1, 2026 for the current calendar year.

Form 5500-EZ — If your Solo 401(k) total assets cross $250,000 at year-end, you must file Form 5500-EZ by July 31, 2027.

Your 2026 Self-Employed Retirement Plan Checklist

1. Project your 2026 net self-employment income now — Pull a January-through-April P&L and annualize it. Your projected net SE income drives every contribution number that follows. Over $215,000 net? A Solo 401(k) is almost certainly your top choice.

2. Decide between SEP-IRA and Solo 401(k) — Solo 401(k) wins for owners earning $50K to $250K who want maximum contribution. SEP-IRA wins for higher earners over $360K who value zero administration over Roth flexibility.

3. Open the plan account by mid-summer — Custodians like Fidelity, Schwab, and Vanguard can have a Solo 401(k) plan document in place within 1 to 2 weeks. Don't wait until December — funding logistics get tight, and missed elections can't be backdated.

4. Coordinate Roth vs. pre-tax — If your 2025 W-2 wages were over $145,000, your 2026 catch-up contributions must be Roth under SECURE 2.0. Confirm your custodian supports Roth Solo 401(k) deferrals before opening the account.

5. Schedule contributions across the year — Set up monthly automatic deferrals from your business account so the contribution doesn't compete with December cash flow. Employer profit-share can be paid as a lump in Q1 of next year.

6. Layer health and HSA contributions on top — A self-employed owner with a high-deductible health plan can also contribute up to $4,400 (self-only) or $8,750 (family) to an HSA in 2026, fully deductible above the line. Stack it with the retirement plan for maximum tax sheltering.

7. Review every two years for plan migration — A SEP-IRA today can roll into a Solo 401(k) tomorrow without tax consequence. As your income grows past the SEP-IRA's "needs $360K to max" threshold, switching to a Solo 401(k) typically captures another $10,000 to $20,000 of annual tax savings.

The Bottom Line for Florida Owners

The 2026 retirement plan limits are the highest the IRS has ever set, the QBI deduction is permanent, and Florida's tax structure rewards every dollar you shelter. Sitting on the sidelines this year — or staying with a SEP-IRA when a Solo 401(k) would shelter another $20,000 — is leaving real money on the table.

At Accounting BOSS, we help Florida self-employed owners pick the right plan, set it up before the deadlines that matter, and coordinate retirement contributions with QBI, S-corp wage planning, and quarterly estimates. If you want to know exactly how much tax you can shelter in 2026 — and which plan gets you there with the least friction — schedule a quick call. We'll model the numbers against your projected income and have a recommendation in hand before the next quarterly estimate is due.