Reviewed by Anil Rajput, CPA · Last reviewed July 2026
Quick answer: Both a SEP-IRA and a Solo 401(k) let a self-employed owner-operator shelter a large share of income from tax while saving for retirement, and for 2026 both can reach a total of $72,000. The practical difference is that a Solo 401(k) lets you contribute more at low to moderate income, because it allows a $24,500 employee deferral on top of the employer share, while a SEP-IRA is simpler but needs much higher income to reach the same total. For most single-truck operators, the Solo 401(k) usually wins, at the cost of a little more paperwork.
This is general information, not tax or investment advice. Contribution limits, deadlines, and the right account for you depend on your income, entity, and goals, and the figures below can change. Confirm current limits and your own numbers with a CPA.
Why should an owner-operator care about a retirement plan?
Because it is one of the few deductions large enough to move your tax bill meaningfully, and it pays you instead of the IRS. A contribution to either account lowers your taxable income now, so a driver in a 22% bracket who puts away $20,000 saves thousands in tax while building savings. Truck equity is not a retirement plan, and Social Security alone rarely is either. For where this fits among your write-offs, see our deduction checklist.
What is a SEP-IRA?
A SEP-IRA is the simplest self-employed retirement plan. You contribute as the employer, up to 25% of compensation, which works out to roughly 20% of net self-employment income, capped at $72,000 for 2026. There is almost no paperwork, no annual filing for most, and you can set it up and fund it up to your tax deadline, including extensions. The tradeoff is that it is employer-contribution only, so at lower incomes you cannot put away as much.
What is a Solo 401(k)?
A Solo 401(k) is a one-participant 401(k) for a business with no employees other than a spouse. It has two parts, and that is its advantage:
- Employee deferral: up to $24,500 for 2026, which you can contribute regardless of the 25% limit.
- Employer contribution: up to 25% of compensation on top, to a combined cap of $72,000.
If you are 50 or older, a catch-up of $8,000 raises the total, and a special enhanced catch-up applies at ages 60 to 63. The two-part structure is why a Solo 401(k) lets you save far more at modest income than a SEP-IRA does.
Which one lets you save more?
At the same income, the Solo 401(k) almost always allows a larger contribution, because the $24,500 employee deferral stacks on top of the employer portion. Consider an owner-operator with $60,000 of net profit. A SEP-IRA caps the contribution near 20% of that, roughly $12,000. A Solo 401(k) allows the full $24,500 deferral plus an employer contribution, potentially doubling what goes in. Only at high income, where the 25% employer share alone approaches the cap, do the two converge. A SEP-IRA needs roughly $238,000 of net income to reach the $72,000 maximum on the employer contribution alone.
SEP-IRA vs Solo 401(k) at a glance for 2026
- 2026 total limit; SEP-IRA: $72,000; Solo 401(k): $72,000
- Employee deferral; SEP-IRA: none; Solo 401(k): up to $24,500
- Employer contribution; SEP-IRA: up to 25% of comp; Solo 401(k): up to 25% of comp
- Age 50+ catch-up; SEP-IRA: none; Solo 401(k): $8,000
- Saves more at low to mid income; SEP-IRA: no; Solo 401(k): yes
- Paperwork; SEP-IRA: minimal; Solo 401(k): more, plus a filing once assets pass a threshold
So which should you choose?
For most single-truck owner-operators, the Solo 401(k) is the stronger choice because it lets you save more at typical income levels and offers a Roth option at many providers. Choose the SEP-IRA if you value simplicity above all, or if your income is high enough that the employer contribution alone hits the cap. The best plan is the one you will actually fund, so match it to how you run, and set it up with a CPA who can confirm your contribution math.
Frequently asked questions
Up to $72,000 total to either a SEP-IRA or a Solo 401(k). The difference is how you get there: a Solo 401(k) allows a $24,500 employee deferral plus an employer contribution, while a SEP-IRA is employer contribution only, up to 25% of compensation. Those age 50 and older can add catch-up contributions to a Solo 401(k).
For most, the Solo 401(k), because the employee deferral lets you save more at typical trucking incomes and it often offers a Roth option. The SEP-IRA wins on simplicity and for very high earners whose 25% employer contribution already reaches the cap. Your income level decides it, so run the numbers.
Yes. Contributions to a traditional SEP-IRA or the pre-tax side of a Solo 401(k) reduce your taxable income for the year, which lowers your income tax. It is one of the largest deductions available to a self-employed driver, which is why it is worth funding before year-end planning.
A SEP-IRA can generally be opened and funded up to your tax filing deadline, including extensions. A Solo 401(k) usually must be established by year-end to make employee deferrals for that year, though employer contributions can follow later. The deadlines differ, so plan ahead rather than waiting for tax season.
A Solo 401(k) is for a business with no full-time employees other than you and a spouse. Once you hire eligible employees, you generally must move to a different plan. For a single-truck owner-operator or an owner-and-spouse operation, the Solo 401(k) fits; a growing fleet with drivers does not.
Both plans let you vary contributions, which suits trucking's uneven income. You are not locked into a fixed amount, so you can contribute more in a strong year and less in a lean one. That flexibility is one reason these plans fit owner-operators better than rigid arrangements.
Turn a strong year into retirement, not just taxes
You cannot size a retirement contribution without knowing your real net profit, and that comes from clean books. Ace Global gives owner-operators and small fleets a dedicated bookkeeper backed by CPAs who keeps your profit visible all year, so you can fund the right amount before deadlines instead of guessing at tax time. Flat pricing, no long-term contracts, answers on WhatsApp or iMessage. Get started with Ace Global today.
Related reading
- How much do owner-operators pay in taxes?
- Owner-operator tax deduction checklist
- LLC, sole proprietor, or S-corp?
Sources
This article is for informational purposes only and does not constitute tax or investment advice. Contribution limits, deadlines, and eligibility change and depend on your situation. Confirm current figures and your own contribution math with a qualified professional.