You can contribute to a Keogh (HR-10) plan if you have net earnings from self-employment through an unincorporated business. That covers sole proprietors, partners in a partnership, and members of an LLC that isn’t taxed as a corporation. If you have employees who meet minimum age and service rules, they must be covered by the plan too. The IRS notes that the “Keogh” label is rarely used today because the tax code no longer separates corporate from non-corporate plan sponsors, but the plans themselves remain available, sheltering up to $72,000 a year in a defined contribution structure or funding a benefit worth as much as $290,000 annually in a defined benefit structure for 2026.1Internal Revenue Service. Retirement Plans for Self-Employed People
You Need Earned Income From Self-Employment
Eligibility turns on one thing: earned income from personal services in a trade or business. Money you actively work for counts. Passive income does not, even when it flows through the same entity. Rent, interest, and dividends won’t create Keogh contribution room on their own. Without net profit from a self-employment activity, there is nothing to contribute against.
Your contribution base begins with net profit from the business, but it isn’t just the figure on your Schedule C or K-1. You subtract the deductible portion of your self-employment tax (half of what you owe), then subtract the Keogh contribution itself. That circular calculation is why the effective maximum for a self-employed person works out to roughly 20% of net self-employment earnings, even though the statutory limit for employees is 25% of compensation.
Business Structures That Qualify
Sole proprietorships are the simplest route. You earn the income, report it on Schedule C, and make the contribution. No entity paperwork sits between you and the plan.
Partnerships qualify, but the contribution math happens at the individual partner level. Each partner’s share of net income determines that partner’s own contribution capacity. The partnership doesn’t contribute on behalf of partners as a pooled amount.
LLCs qualify if they are taxed as a sole proprietorship (single-member) or a partnership (multi-member). Once an LLC elects to be taxed as a corporation, the owners lose Keogh eligibility because the IRS treats them as corporate employees.
Corporate Owners Are Excluded
Owners of C-corporations and S-corporations cannot establish or contribute to a Keogh plan. The IRS treats these owners as common-law employees of their corporation rather than as self-employed persons. Owning 100% of the stock doesn’t change that, and neither does being the only person in the company. If you’re on the corporate payroll, you’re an employee for retirement plan purposes and need to use a corporate-sponsored plan such as a 401(k) or SEP-IRA instead.1Internal Revenue Service. Retirement Plans for Self-Employed People
A W-2 Day Job Doesn’t Disqualify You
Holding a full-time W-2 job does not shut you out of a Keogh plan for separate self-employment income. If you draw a salary during the day and earn freelance or consulting money on the side, reported on a 1099, you can open a Keogh based on that self-employment income alone. Your contribution limit is calculated only from the net earnings of the self-employment activity, not your wages.
One overlap to watch. Contributions to your employer’s 401(k) and contributions to your own Keogh share certain annual limits. Combined elective deferrals across all plans can’t exceed $24,500 in 2026, though the overall annual addition limit of $72,000 applies separately to each employer’s plan.2Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living
Your Employees Come With You
A Keogh plan isn’t a solo shelter once you have staff. If you have employees who meet minimum age and service thresholds, federal law requires you to include them. A qualified plan cannot require a worker to be older than 21 or to have more than one year of service as a condition of participating.3Office of the Law Revision Counsel. 26 U.S. Code 410 – Minimum Participation Standards There is one exception: a plan that provides 100% immediate vesting after two years may require two years of service.
The contribution formula you apply to yourself must be applied equally to each eligible employee. If you fund 15% of your own net earned income, you owe 15% of each eligible employee’s compensation as well. This is where Keogh plans get expensive for businesses with employees on the payroll, and it’s the reason many owners with staff end up looking at other plan types.
How Much You Can Actually Put In for 2026
Most Keogh plans are defined contribution plans. The maximum annual addition to any participant’s account in 2026 is $72,000, or 100% of compensation, whichever is less. For a self-employed person, the effective cap is roughly 20% of net self-employment earnings after the required adjustments. Only compensation up to $360,000 can be counted when calculating contributions.2Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living
Participants aged 50 and older can add catch-up contributions of $8,000 in 2026. A higher “super catch-up” of $11,250 applies to participants who turn 60, 61, 62, or 63 during the year.4Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026; IRA Limit Increases to $7,500 Starting in 2026, participants who earned more than $150,000 in wages the prior year must make catch-up contributions on a Roth (after-tax) basis.
A defined benefit Keogh works differently. Instead of setting what goes in, you set a target annual retirement benefit, and an actuary calculates the contribution needed to fund it. The maximum annual benefit a defined benefit plan can promise in 2026 is $290,000.2Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living Because contributions are actuarially driven rather than a flat percentage, this structure can allow much larger annual contributions than the $72,000 defined contribution cap, which is why it appeals to high-income self-employed individuals in their 50s and 60s. The trade-off is that the business must fund the actuarially determined amount every year, and eligible employees must receive the same promised benefit formula as the owner.
Miss December 31 and You Miss the Year
Eligibility for a given tax year can be lost on a calendar date. The plan itself must be established by December 31 of the tax year you want the contribution to count for. You cannot wait until April to create the plan and backdate the contribution. The written plan document must be signed and in place before the year ends.1Internal Revenue Service. Retirement Plans for Self-Employed People
The money itself doesn’t need to be deposited by December 31. You have until your tax filing deadline to fund the contribution. For sole proprietors that’s typically April 15, and filing an extension pushes the deposit deadline to the extended due date, usually October 15. This lets you finalize the net earnings calculation before committing to a dollar amount. The rule is stricter than a SEP-IRA, which can be both established and funded by the filing deadline. If December 31 passes without a signed Keogh plan document in place, the deduction for that year is gone.