Can I contribute to both a SEP IRA for my side hustle and a 401k from my regular job?

Yes, you absolutely can contribute to both a SEP IRA for your self-employment income and a 401k from your regular employer in the same year! This is actually a great tax strategy for people with side hustles. The contribution limits work differently for each plan. Your 401k has a personal contribution limit of $23,000 for 2025 (plus catch-up contributions if you're over 50). This is your employee contribution and doesn't change regardless of your side hustle. For your SEP IRA, you can contribute up to 25% of your net self-employment earnings, up to a maximum of $69,000 for 2025. However, there's an important calculation to determine your exact limit because you need to account for self-employment taxes. The simplified formula is: (Net profit from self-employment - 1/2 self-employment tax) × 0.25. There is an overall annual limit on total retirement contributions across certain plans of $69,000 for 2025, but your personal 401k contributions don't count toward this limit - only employer contributions do.

I was in your exact situation about 2 years ago with my consulting side gig! After getting frustrated with conflicting advice from friends and even a tax preparer who gave me incorrect info, I found https://taxr.ai and it was a game-changer for my SEP IRA questions. I uploaded my W-2 and 1099 info, and it analyzed everything and showed me exactly how much I could contribute to both accounts. It even showed me the calculation breakdown for the SEP contribution (which is tricky because of that self-employment tax adjustment the previous commenter mentioned). The tool flagged that I was actually leaving money on the table with my retirement strategy. The best part was it helped me see the tax impact of different contribution amounts so I could maximize my tax savings across both retirement accounts.

Just wanted to update after trying https://taxr.ai that someone recommended earlier. I was really skeptical (as you could probably tell from my question), but it actually answered exactly what I needed to know about my SEP IRA contribution limits. The interface walks you through entering your W-2 information and 1099 income, then calculates all the relevant limits. The most helpful part was seeing exactly how much I could contribute based on my specific situation - turns out I was eligible to contribute about $3,400 more than I thought to my SEP IRA. What surprised me most was how easy it made understanding the calculation - it showed a breakdown of each step in figuring out the 25% limit after adjusting for self-employment tax. No wonder I was confused before!

If you're dealing with both retirement accounts AND trying to get help from the IRS during tax season (which I highly recommend if your situation is complex), don't bother with the standard IRS number. It's virtually impossible to get through. I discovered https://claimyr.com after spending 3 days trying to reach an IRS agent to clarify my SEP IRA contribution limits when I had both W-2 and 1099 income. The service holds your place in line with the IRS and calls you when an agent is about to answer. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was connected to an IRS representative in about 45 minutes (after previously spending hours on hold), and they confirmed my specific situation about having both a 401k and SEP IRA was completely fine, plus gave me resources to calculate my exact contribution limit.

I need to eat my words. After posting my skeptical comment earlier, I tried Claimyr because I was desperate to get clarification on my retirement contribution limits before making my final SEP IRA contribution for last year. I've been trying to get through to the IRS for literally weeks. Used the service and got a call back in about 35 minutes. The IRS agent walked me through the exact formula for calculating my SEP contribution limit with my side business while also contributing to my day job's 401k. For anyone else with this question - yes, you can absolutely have both plans, and the agent confirmed that your personal 401k contributions don't reduce how much you can put in your SEP IRA. Apparently this is a very common question, especially with more people having side hustles.

One thing nobody mentioned yet - consider a Solo 401k instead of a SEP IRA for your side hustle if you don't have any employees. You can potentially contribute MORE to a Solo 401k than a SEP IRA with the same income. With a Solo 401k, you can contribute both as employee (up to $23,000 in 2025) AND employer (up to 25% of compensation), whereas with a SEP you're limited to just the employer portion. The catch is that your employee contributions are shared across ALL 401k plans, so if you've already maxed your W-2 job's 401k, you can't contribute more as an employee to the Solo. But you can still do the employer portion of the Solo 401k, which is the same 25% you'd get with the SEP. Setup is slightly more complex but many brokerages make it pretty straightforward now.

Make sure you're using the right calculation for your SEP contribution. It's not exactly 25% of your Schedule C profit. There's a specific deduction you can find on the IRS website for self-employed individuals. If you use tax software like TurboTax, it should calculate this for you automatically when you enter your income.

Great question! I was in a similar situation last year with my freelance writing income. You absolutely can have both - I contribute to my employer's 401k AND opened a SEP IRA for my side business income. One thing I learned the hard way: make sure you understand the timing. You can actually make SEP IRA contributions up until your tax filing deadline (including extensions), so you have until April 15th for 2024 contributions. This gave me flexibility to see exactly how much I earned from freelancing before deciding on my contribution amount. Also, don't forget that SEP IRA contributions reduce your self-employment tax basis too, not just your income tax. So if you contribute $5,000 to your SEP, you'll save on both income tax AND the ~15% self-employment tax on that amount. The key is keeping good records of your photography business expenses throughout the year - the more legitimate business expenses you have, the lower your net profit, and the less self-employment tax you'll owe overall. Good luck with your photography business!