Is Retirement Contributions Tax Deductible? 2026 Guide
Yes — Deductible
Yes, retirement contributions to a SEP-IRA, Solo 401(k), or SIMPLE IRA are tax deductible for self-employed individuals. This is one of the largest deductions available to freelancers — up to $69,000 for 2026.
IRS Form: Form 1040, Line 16
Conditions & Requirements
- Must have net self-employment income
- SEP-IRA: contribute up to 25% of net self-employment earnings (max $69,000 for 2026)
- Solo 401(k): employee deferral up to $23,500 + employer contribution up to 25% of net earnings
- Contributions must be made by the tax filing deadline (including extensions)
- This is a Form 1040 deduction, not a Schedule C business expense
What the IRS Says
Self-employed retirement contributions are deductible as an adjustment to income on Form 1040. SEP-IRA contributions are governed by IRC Section 408(k) with a limit of 25% of net self-employment earnings. Solo 401(k) plans allow both employee deferrals under IRC Section 402(g) and employer contributions under Section 415(c). The total contribution limit for 2026 is $69,000 ($76,500 if age 50+ with catch-up).
Documentation You'll Need
- ☑Retirement account contribution statements
- ☑Form 5498 from your brokerage or plan administrator
- ☑Schedule C showing net self-employment income
- ☑Plan adoption agreement (for Solo 401(k), must be established by December 31)
Typical Deduction Amount
$5,000 - $69,000/yr
Estimated range for most freelancers and self-employed individuals
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Related Deductions
Is Health Insurance Deductible?
Yes, self-employed individuals can deduct 100% of health insurance premiums for themselves, their spouse, and dependents.
Is Accounting Fees Deductible?
Yes, accounting and bookkeeping fees are fully tax deductible.
Is Legal Fees Deductible?
Yes, legal fees related to your business are fully tax deductible.
Frequently Asked Questions
SEP-IRA vs. Solo 401(k) — which is better?
A Solo 401(k) usually allows higher contributions at lower income levels because of the employee deferral component ($23,500). A SEP-IRA is simpler to set up and administer. Both have the same total contribution ceiling at higher income levels.
When is the deadline to make retirement contributions?
SEP-IRA: by your tax filing deadline, including extensions (October 15 if you extend). Solo 401(k): employee deferrals by December 31, employer contributions by filing deadline. The Solo 401(k) plan itself must be established by December 31.
Can I contribute to a retirement plan with a small freelance income?
Yes. Even modest contributions reduce your taxable income. With $30,000 in net earnings, you could contribute up to $7,500 to a SEP-IRA or up to $23,500 in employee deferrals to a Solo 401(k), significantly reducing your tax bill.
TaxTidy provides expense organization tools based on the most current US tax law available to it. TaxTidy is not a CPA, Enrolled Agent, or licensed tax professional. All categorizations, deductions, and tax calculations are estimates. Please verify all data for accuracy and consult a certified tax professional before filing.
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