An HR-10 plan, almost always called a Keogh plan today, is a tax-qualified retirement plan for self-employed business owners and partners in unincorporated businesses. Contributions reduce your current taxable income, investment earnings grow tax-deferred, and you pay ordinary income tax on the money when you withdraw it in retirement. For 2026, a defined contribution Keogh accepts annual additions up to $72,000, and a defined benefit Keogh can fund a retirement benefit as high as $290,000 a year.1Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living The IRS stopped treating corporate and noncorporate plans differently years ago, so “Keogh” and “HR-10” now function as nicknames for what is technically just a qualified plan sponsored by an unincorporated business.2Internal Revenue Service. Retirement Plans for Self-Employed People
Who Can Set One Up
Anyone with net earnings from self-employment can establish a Keogh: sole proprietors, partners, and LLC owners taxed as self-employed. If your business is a C-corporation or an S-corporation, you would use a standard corporate qualified plan instead. The HR-10 label attaches specifically to plans sponsored by unincorporated businesses.2Internal Revenue Service. Retirement Plans for Self-Employed People
If your business has employees beyond you and your spouse, you cannot set up a Keogh only for yourself. Any employee age 21 or older who has completed a year of service (at least 1,000 hours in a 12-month period) must be included.3Internal Revenue Service. A Guide to Common Qualified Plan Requirements4Office of the Law Revision Counsel. 26 US Code 410 – Minimum Participation Standards Those employees have to receive contributions under the same formula that applies to you. Giving the owner 20% and the staff 5% fails nondiscrimination testing, and a failure can disqualify the plan and make every dollar deferred inside it immediately taxable.
The Two Kinds of Keogh Plans
Every Keogh is either a defined contribution plan or a defined benefit plan, and that choice shapes how much you can contribute, whether contributions are mandatory, and how much administration you take on.
Defined Contribution: Profit-Sharing or Money Purchase
A defined contribution Keogh works the way most people picture a retirement account. Money goes in, it gets invested, and your eventual retirement income depends on how the investments do. Nothing is promised.
A profit-sharing Keogh is discretionary. Each year you decide whether to contribute and how much, up to the annual limit. If business income drops, you can skip contributions with no penalty. This flexibility is why profit-sharing is the most common Keogh structure.
A money purchase Keogh locks you into a fixed contribution percentage every year, regardless of results. You commit to the rate when you establish the plan and owe it even in lean years.5Internal Revenue Service. Choosing a Retirement Plan: Money Purchase Plan6Office of the Law Revision Counsel. 26 US Code 4971 – Taxes on Failure to Meet Minimum Funding Standards7eCFR. 26 CFR 54.4971-1 – General Rules Relating to Excise Tax on Failure to Meet Minimum Funding Standards Most self-employed owners avoid the money purchase structure for that reason.
Defined Benefit
A defined benefit Keogh flips the calculation. Instead of capping what goes in, you set the retirement benefit you want and work backward. An enrolled actuary runs the numbers each year, factoring in your age, expected investment returns, and the target benefit. Funding that benefit often requires annual contributions well above what any defined contribution plan permits, which makes defined benefit Keoghs attractive for high-income professionals in their 50s or 60s who need to shelter large sums quickly. The catch is administrative cost: an actuary is required every year.
2026 Contribution Limits and How the Math Works
For a defined contribution Keogh, total annual additions to a participant’s account in 2026 cannot exceed the lesser of 100% of compensation or $72,000.1Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living Only compensation up to $360,000 counts when calculating contributions.8Ascensus. Understanding the 2026 Retirement Plan Contribution Limits
Where people get tripped up is the contribution rate for a self-employed owner. Employees at a company can receive employer contributions of up to 25% of pay. When you are both the employer and the employee, your own contribution reduces the compensation base used to calculate that contribution. The IRS resolves the circular math with a reduced-rate table in Publication 560: a 25% rate applied to post-contribution compensation works out to 20% of pre-contribution self-employment income.9Internal Revenue Service. Publication 560 (2025), Retirement Plans for Small Business10Internal Revenue Service. Self-Employed Individuals: Calculating Your Own Retirement Plan Contribution and Deduction
The compensation base itself is not your Schedule C net profit. You first subtract the deductible half of your self-employment tax, then apply the 20% rate.11Internal Revenue Service. Topic No. 554, Self-Employment Tax On $100,000 of net profit, the deductible half of self-employment tax is roughly $7,065, leaving adjusted net income of $92,935. Twenty percent of that is $18,587, and that is the maximum deductible contribution for the year.
Defined benefit Keoghs are not governed by percentage limits. The cap sits on the output: the maximum annual retirement benefit the plan can pay, which for 2026 is $290,000.12Internal Revenue Service. COLA Increases for Dollar Limitations on Benefits and Contributions An actuary calculates what you have to fund each year to get there. Starting a defined benefit plan later in your career means larger required contributions because there are fewer years for investment growth to close the gap.
Contributions to any Keogh must be made by the due date of your tax return, including extensions, to be deductible for that year. A calendar-year sole proprietor who files an extension generally has until October 15 to fund the prior year.
Getting Money Out
Every dollar you withdraw from a Keogh is taxed as ordinary income in the year you receive it. The timing rules cut both ways: pull money too early and there’s a penalty, wait too long and there’s a different penalty.
Before Age 59½
Distributions taken before 59½ owe an additional 10% tax on top of regular income tax unless an exception applies.13Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts Common exceptions include death or total and permanent disability, separation from service in or after the year you turn 55, a series of substantially equal periodic payments based on life expectancy, unreimbursed medical expenses to the extent they would be deductible, and distributions to a former spouse under a qualified domestic relations order. When an exception spares you the 10%, the distribution is still taxable as ordinary income.
Required Minimum Distributions
You generally must start required minimum distributions by April 1 of the year after you turn 73.14Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) If you still work in the business and own less than 5% of it, some plans let you delay RMDs until actual retirement. Skipping an RMD triggers an excise tax on the amount you should have taken.
Rollovers
A Keogh is a qualified plan, so balances can be rolled into a traditional IRA or another qualified plan such as a 401(k).15Internal Revenue Service. Rollover Chart A direct trustee-to-trustee transfer avoids mandatory withholding and keeps the money tax-deferred, which matters if you close the business and need somewhere to move the assets.
Paperwork You Take On
Keogh plans are heavier to run than most alternatives, and this is often the decision point.
You need a written plan document that meets ERISA and the Internal Revenue Code before contributions can start. Most owners adopt a pre-approved prototype from a financial institution or third-party administrator; custom drafting is possible but expensive.
Qualified plans generally file Form 5500 annually with the IRS and Department of Labor.16U.S. Department of Labor. Form 5500 Series A plan covering only you (or you and your spouse) uses the simpler Form 5500-EZ.17Internal Revenue Service. About Form 5500-EZ One-participant plans whose total assets across all your one-participant plans do not exceed $250,000 at year-end are generally exempt from filing, except in the plan’s final year.18Internal Revenue Service. 2025 Instructions for Form 5500-EZ Once you cross that threshold, filings become mandatory.
Plans covering non-owner employees also have to pass annual nondiscrimination testing showing that contributions and benefits do not disproportionately favor higher-paid participants. Failing means either corrective contributions for lower-paid staff or corrective distributions to the owner. Defined benefit plans add annual actuarial work on top of everything else. Between actuary fees, filings, and testing, a defined benefit Keogh can run several thousand dollars a year in professional services.
How a Keogh Compares to a SEP IRA and Solo 401(k)
Keogh plans were the only self-employed option for decades. Today, SEP IRAs and Solo 401(k) plans have taken over most of the market, and understanding why is the practical answer to whether you should still choose an HR-10.
A SEP IRA allows employer contributions of up to 25% of compensation (the same effective 20% for self-employed owners), with the same $72,000 ceiling for 2026. Setup is straightforward, there is no annual filing regardless of size, and any brokerage will open one. The limitation is that a SEP IRA has no employee deferral piece, and if you have employees you must contribute the same percentage for everyone.2Internal Revenue Service. Retirement Plans for Self-Employed People
A Solo 401(k) is available to owners with no employees other than a spouse. It combines an employee elective deferral of up to $24,500 in 2026 with an employer profit-sharing contribution of up to 20% of net self-employment income, subject to the same $72,000 combined ceiling.19Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 The dual structure lets you reach higher total contributions at lower income levels than a SEP IRA or profit-sharing Keogh. Solo 401(k)s also allow Roth contributions and participant loans, and Form 5500-EZ isn’t required until plan assets top $250,000.
Where a Keogh still stands alone is the defined benefit version. If you earn well into six figures and want to shelter far more than $72,000 a year, a defined benefit Keogh is the only self-employed plan that can accommodate it, with some high-income professionals contributing $150,000 or more per year. For most other situations, a SEP IRA or Solo 401(k) delivers the same or better contribution capacity with a fraction of the administrative work.