SEP-IRA vs Solo 401(k) 2026: Florida's Retirement Tax Guide

If you are self-employed in Florida, the IRS just handed you one of the biggest retirement contribution windows in history. For tax year 2026, the Solo 401(k) total cap climbs to $72,000, the SEP-IRA cap matches it at $72,000, and a small band of business owners between ages 60 and 63 can now shelter up to $83,500 thanks to the SECURE 2.0 "super catch-up" provision. These are not trivial increases — they are the difference between paying an extra $10,000 in self-employment tax this year or sending that money to your future self.

But the bigger limits come with new traps. A Roth-only catch-up requirement kicks in for higher earners, SEP-IRA set-up deadlines hinge on whether you filed an extension, and the "right" plan depends heavily on your net self-employment income. Here is exactly how to decide, contribute, and document it so the IRS never questions the deduction.

What Changed for Self-Employed Retirement Plans in 2026

The IRS bumped nearly every retirement plan dial this year, and the increases are larger than the inflation-adjusted defaults we saw from 2023 through 2025.

Solo 401(k) employee deferral — Climbs to $24,500 (up $1,000 from 2025). This is the portion you contribute as your own "employee."

Standard catch-up (age 50–59 and 64+) — Remains at $8,000, bringing the employee deferral to $32,500 for eligible owners.

SECURE 2.0 super catch-up (age 60–63) — Increases to $11,250, pushing the employee deferral to $35,750 for owners in that four-year window.

Total Solo 401(k) limit — $72,000 for owners under 50, with catch-ups layered on top.

SEP-IRA limit — $72,000 or 25% of net self-employment compensation, whichever is smaller. The compensation cap used in the calculation rose to $360,000 (up from $350,000).

Mandatory Roth catch-up — Starting in 2026, SECURE 2.0 Section 603 requires any catch-up contribution made by a participant whose prior-year FICA wages exceeded $145,000 (indexed to $150,000 for 2026) to be made as Roth (after-tax). If your Solo 401(k) plan document does not allow Roth, your catch-up is blocked until you amend the plan.

Solo 401(k): The Power Plan for Most Florida Owners

A Solo 401(k) — also called a one-participant 401(k) — is the single most flexible retirement vehicle the IRS allows for owner-only businesses. You wear two hats: employee (deferral) and employer (profit-sharing). Both hats fund the same account.

Suppose you are 52 years old, run a single-member LLC taxed as an S-corporation, and pay yourself $120,000 in W-2 wages. Your 2026 contributions could look like this: $24,500 employee deferral, plus $8,000 catch-up, plus 25% of W-2 wages as employer profit-sharing ($30,000). Total sheltered: $62,500 — all deductible against federal income tax. If you structured the same income as a sole proprietorship, the math is similar but the employer portion is capped at roughly 20% of net self-employment earnings after the deductible half of SE tax.

For owners under 50 with W-2 wages around $175,000 or higher, the Solo 401(k) and SEP-IRA produce nearly identical totals. Below that threshold, the Solo 401(k) almost always wins because the flat $24,500 employee deferral does not depend on income percentage.

SEP-IRA: Simpler Paperwork, Tighter Rules

A SEP-IRA (Simplified Employee Pension) is the no-frills option. You do not need a formal plan document, no annual Form 5500 filing, and setup takes a single form at most custodians. The trade-off: every contribution must be employer money, capped at 25% of compensation (about 20% for sole proprietors after the SE tax adjustment), and you cannot make elective deferrals or catch-up contributions.

The deadline advantage is real: you can open and fund a SEP-IRA up to your tax filing deadline including extensions. File for an extension by April 15, 2026, and you have until October 15, 2026, to establish and fund a SEP for the 2025 tax year. The Solo 401(k) has a similar funding deadline but requires the plan document to exist by December 31 of the tax year.

Solo 401(k) vs. SEP-IRA: 2026 Side-by-Side

How the Math Plays Out at Different Income Levels

The chart tells the story: below roughly $175,000 of net self-employment income, the Solo 401(k)'s flat employee deferral opens a $20,000–$25,000 gap over the SEP-IRA. Above that income level, the two plans converge because the 25% employer formula catches up to — and then hits — the shared $72,000 ceiling.

Florida-Specific Considerations

Florida has no state income tax, which changes the retirement math in one important way. Traditional (pre-tax) deferrals only save you federal income tax plus self-employment tax, never state tax. That makes Roth contributions relatively more attractive here than in high-tax states like California or New York, because the "forgone deduction" cost is lower. If you expect to retire in a state with income tax or already live on significant investment income, maxing Roth inside a Solo 401(k) becomes a serious strategy.

Florida owners should also watch the homestead interaction: IRAs and 401(k) balances are both protected from creditors under Florida Statute 222.21, but traditional IRAs (including SEPs) enjoy broader federal bankruptcy protection than rollover amounts from 401(k) plans. Work with an advisor before rolling a Solo 401(k) into a SEP-IRA purely for simplicity — you may give up creditor protection in the process.

Your 2026 Retirement Plan Checklist

1. Calculate your projected net SE income — Run a rough 2026 profit forecast by quarter. This tells you whether the Solo 401(k), SEP-IRA, or both make sense. Anything over $60,000 of net SE income means leaving money on the table if you skip a plan.

2. Pick your plan before December 31, 2026 — For a Solo 401(k) to count for 2026, the plan document must be signed by December 31. SEP-IRAs have until your 2026 filing deadline (plus extensions), but you still need the account opened before you fund it.

3. Amend your Solo 401(k) plan for Roth catch-up — If you earned $150,000+ in FICA wages in 2025 and plan to make catch-up contributions in 2026, confirm your plan document allows Roth catch-up. Most 2024-vintage plans need an amendment.

4. Set up employer matching contributions after year-end — Employer profit-sharing can be funded up to your extended filing deadline. Wait until you know your final net income to avoid over- or under-contributing.

5. Document compensation correctly — S-corp owners: 25% is based on W-2 wages only, not K-1 distributions. Sole proprietors: use the Schedule C net profit less half of SE tax, then apply the ~20% effective rate.

6. File Form 5500-EZ if required — Solo 401(k) balances above $250,000 trigger an annual Form 5500-EZ filing due July 31. The penalty for skipping is $250 per day, capped at $150,000.

7. Review beneficiary designations every year — Retirement accounts pass outside your will. A stale beneficiary — an ex-spouse, a deceased parent, or a trust that no longer exists — is the single most common estate planning mistake we see.

Ready to Build Your 2026 Contribution Strategy?

Every extra $10,000 you shelter in a Solo 401(k) or SEP-IRA is roughly $3,200 in combined federal income and self-employment tax savings — and those savings compound for decades inside the account. At Accounting BOSS, we help Florida self-employed owners, single-member LLCs, and S-corp shareholders pick the right plan, calculate the maximum allowable contribution, and document every dollar so the deduction holds up under audit. Reach out through our contact page and we will map your 2026 retirement deduction in one sitting.