Short Answer
For 2026 you can defer up to $17,000 of your salary into a SIMPLE IRA, plus a $4,000 catch-up at age 50 to 59 or 64+, or a higher $5,250 catch-up at age 60 to 63. Certain small-employer plans use a higher $18,100 employee limit under SECURE 2.0. On top of your deferral, your employer must add either a dollar-for-dollar match up to 3% of your pay (no compensation cap) or a 2% nonelective contribution on compensation up to $360,000. The traditional deferral is pre-tax for income tax but still pays Social Security and Medicare tax. The 2025 employee limit was $16,500 with a $3,500 catch-up.
How This Is Calculated
This calculator applies IRS Notice 2025-67 (2026 retirement plan COLA limits), the SIMPLE IRA framework in IRC section 408(p), and the SECURE 2.0 Act changes in sections 109 (age 60 to 63 catch-up) and 117 (higher small-employer limit). The calculation proceeds in four steps. For the full background, see our SIMPLE IRA Contribution Limits Guide.
Step 1: Set the Employee Deferral Limit Confirmed
The base employee salary reduction limit under IRC section 408(p)(2)(E) for 2026 is $17,000 in a standard SIMPLE plan, or $18,100 in a section 117 enhanced small-employer plan (was $16,500 / $17,600 for 2025). Your planned deferral is capped at this base limit plus any catch-up.
Step 2: Add the Age Catch-Up Confirmed
Workers age 50 to 59 and age 64 or older add a $4,000 catch-up in a standard plan ($3,850 in a section 117 plan) for 2026. Workers age 60, 61, 62, or 63 add a higher $5,250 catch-up under SECURE 2.0 section 109. The catch-up is part of your own salary deferral, not an employer contribution.
Step 3: Compute the Employer Contribution Confirmed
The employer chooses one formula:
- Matching (default 3%): a dollar-for-dollar match on your deferrals up to 3% of your compensation. There is no $360,000 compensation cap on the match. The match cannot exceed what you actually defer.
- Reduced match (1% or 2%): the employer may cut the match to as low as 1%, but only for 2 of any 5 consecutive years.
- 2% nonelective: 2% of your compensation (capped at $360,000 for 2026), paid whether or not you defer anything.
Step 4: Total and Estimate Tax Saved Confirmed
Your total annual contribution is the employee deferral (with catch-up) plus the employer contribution. The estimated income tax saved is your pre-tax deferral multiplied by your marginal federal rate. A traditional SIMPLE deferral is excluded from box 1 of your W-2, but it is still subject to Social Security and Medicare (FICA) tax, so the FICA is not reduced.
The match has no compensation cap, but the nonelective does: Under IRC section 408(p)(2)(A) and 408(p)(2)(B), the 3% matching contribution is figured on your actual compensation with no section 401(a)(17) limit, while the 2% nonelective contribution is limited to compensation up to $360,000 for 2026. This is a genuine quirk of SIMPLE plans that this calculator models directly. Confirmed
Assumptions
- 2026 limits per IRS Notice 2025-67 (released November 2025); 2025 per Notice 2024-80.
- The match equals the lesser of your deferral and the chosen match percentage of your full compensation, with no compensation cap.
- The 2% nonelective applies compensation up to $360,000 (2026) / $350,000 (2025).
- The deferral is treated as traditional (pre-tax) for the tax-saved estimate; a Roth SIMPLE deferral would not reduce current income tax.
- Estimated tax saved is illustrative: it multiplies the deferral by your marginal rate and ignores state tax, FICA, and bracket crossover.
- The calculator does not verify your plan-eligibility ($5,000 compensation tests) or the employer's exclusive-plan status.
Frequently Asked Questions
What is the SIMPLE IRA contribution limit for 2026?
For 2026 an employee can defer up to $17,000 of salary into a SIMPLE IRA, up from $16,500 in 2025. Workers age 50 to 59 and age 64 or older add a $4,000 catch-up (was $3,500 in 2025), and workers age 60, 61, 62, or 63 add a higher $5,250 catch-up under SECURE 2.0. On top of the employee deferral, the employer must add either a dollar-for-dollar match up to 3% of compensation or a 2% nonelective contribution. Source: IRS Notice 2025-67 and IRC section 408(p).
What is the higher $18,100 SIMPLE IRA limit for 2026?
Under SECURE 2.0 Act section 117, certain SIMPLE plans use a higher employee deferral limit of $18,100 for 2026 (up from $17,600 in 2025) and a $3,850 age-50 catch-up. This higher limit applies automatically to employers with 25 or fewer employees, and to employers with 26 to 100 employees that elect it and provide an enhanced employer contribution (a 4% match or a 3% nonelective contribution instead of the usual 3% and 2%). The age 60 to 63 catch-up is $5,250 either way.
How much does my employer contribute to a SIMPLE IRA?
A SIMPLE IRA employer must choose one of two formulas each year. The default is a dollar-for-dollar matching contribution on the employee's salary reduction contributions, up to 3% of the employee's compensation, with no compensation cap on the match. The employer may instead make a 2% nonelective contribution for every eligible employee whether or not they defer, using compensation up to $360,000 for 2026. The employer can lower the match to as little as 1%, but only for 2 of any 5 consecutive years.
What is the SIMPLE IRA 2-year rule and 25% penalty?
If you take a distribution from a SIMPLE IRA within the first two years of participating in the plan, and you are under age 59½, the early withdrawal penalty is 25% instead of the usual 10%, under IRC section 72(t)(6). The two-year clock starts on the date the first contribution is deposited to your SIMPLE IRA. The same 25% rate applies if you roll a SIMPLE IRA into a non-SIMPLE plan during the first two years; after two years the normal IRA rollover rules apply.
Can I contribute to a SIMPLE IRA and a 401(k) in the same year?
You can, but your combined elective deferrals across all employer plans (a SIMPLE IRA plus a 401(k) or 403(b) at a different job) are limited to the higher 401(k) deferral ceiling, which is $24,500 for 2026. The SIMPLE IRA deferral counts against that shared limit. Most employers cannot maintain both a SIMPLE IRA and another qualified plan for the same employees in the same year (the exclusive plan rule of section 408(p)), so this situation usually arises only when you work for two unrelated employers.
Is a SIMPLE IRA contribution tax-deductible?
A traditional SIMPLE IRA employee deferral is pre-tax: it is excluded from your taxable wages for federal income tax, so it lowers the income tax you owe, though it is still subject to Social Security and Medicare (FICA) tax. You do not separately deduct it on your return because it is already left out of box 1 of your W-2. Employer matching and nonelective contributions are not included in your income and are deductible by the employer. Under SECURE 2.0, plans may also offer Roth SIMPLE deferrals, which are after-tax and grow tax-free.
What is the difference between a SIMPLE IRA and a SEP IRA?
A SIMPLE IRA allows employee salary deferrals (up to $17,000 for 2026) plus a mandatory employer match or nonelective contribution, and is designed for employers with 100 or fewer employees. A SEP IRA is employer-funded only, with no employee deferrals, and lets the employer contribute up to 25% of compensation (up to $72,000 for 2026), which is far higher. SEP IRAs suit self-employed people and small businesses that want larger, fully discretionary contributions; SIMPLE IRAs suit small businesses that want their employees to be able to defer their own salary.
When must SIMPLE IRA contributions be deposited?
Employers must deposit employee salary reduction contributions to the SIMPLE IRA within 30 days after the end of the month in which the amounts would otherwise have been paid to the employee. Plans subject to Department of Labor rules generally must deposit deferrals as soon as they can reasonably be segregated from the employer's assets, with a 7-business-day safe harbor. Employer matching or nonelective contributions must be made by the due date of the employer's federal income tax return, including extensions.
Who is eligible to participate in a SIMPLE IRA?
An employer can offer a SIMPLE IRA if it had 100 or fewer employees who earned at least $5,000 in the prior year and does not maintain another qualified retirement plan. By default an employee is eligible if they earned at least $5,000 in any two prior calendar years and are reasonably expected to earn $5,000 in the current year, though the employer can set lower thresholds. The plan is established on Form 5304-SIMPLE (employees pick the custodian) or Form 5305-SIMPLE (employer picks the custodian).
What To Do Next
If You Are an Employee in a SIMPLE Plan
Defer at least enough to capture the full 3% match, then push toward the $17,000 limit if your budget allows. Set a per-paycheck amount that reaches your target by year-end, and add the catch-up if you are 50 or older. Submit your deferral election within the 60-day window your employer provides.
If You Own the Business
Run both employer formulas against your actual payroll before the election deadline. The 3% match rewards employees who defer; the 2% nonelective pays everyone. Owners can stack their own $17,000 deferral plus catch-up on top of the uncapped 3% match for a larger total than the headline limit suggests.
If You Want to Save More Than a SIMPLE Allows
A SEP IRA or Solo 401(k) usually allows far larger contributions for the self-employed. Compare the ceilings in the SEP IRA vs Solo 401(k) Calculator before the next plan year, since an employer cannot run a SIMPLE IRA and another plan in the same year.
If You Also Have an IRA
A SIMPLE IRA makes you an active participant, which can phase out your traditional IRA deduction. Check the interaction in the Traditional IRA Deduction Calculator, and consider a Roth IRA if your deduction is limited.
For the Full Background
Read the SIMPLE IRA Contribution Limits Guide for the employer-formula decision, the SECURE 2.0 changes, Roth SIMPLE deferrals, the 2-year rule, and how a SIMPLE IRA compares to other small-business plans.