A profit sharing calculator helps small business owners and plan administrators determine the maximum allowable contribution to each participant under IRS rules. Profit-sharing plans let employers contribute up to 25% of eligible compensation (capped at $70,000 per person for 2025) and choose from multiple allocation formulas — pro-rata, new comparability, or age-weighted — to optimize retirement savings for the owner while remaining compliant with IRS nondiscrimination requirements.
Financial disclaimer: This tool provides estimates for planning purposes only and does not constitute tax or legal advice. New comparability and age-weighted plans require annual IRS nondiscrimination testing by a qualified TPA. Consult a CPA or ERISA attorney before establishing a plan.
Plan Configuration
Same percentage of compensation for all participants
% of each participant's compensation (max 25%)
Gateway minimum typically 5% of compensation
Participants
Contribution by Participant
| Name | Compensation | Rate | Contribution | IRS Max |
|---|
Plan Type Comparison
* New comparability and age-weighted plans require annual IRS nondiscrimination testing by a TPA.
How to Use the Profit Sharing Calculator
Profit-sharing plans are one of the most flexible retirement savings vehicles for small business owners. Unlike a SEP-IRA (which requires proportional contributions for all eligible employees) or a SIMPLE IRA (with fixed contribution formulas), profit-sharing plans give employers wide latitude to choose both the contribution amount and the allocation formula each year. This profit sharing calculator helps you model contributions across three common formulas so you can maximize the owner's benefit while controlling the cost for employees.
Step 1: Choose Your Allocation Formula
Select from three IRS-approved formulas. Pro-rata is the simplest: every participant gets the same percentage of compensation. If you set 10%, the owner earning $300,000 gets $30,000 and an employee earning $60,000 gets $6,000. New comparability (cross-tested) assigns different rates to different groups — you can contribute 25% for the owner and just 5% for staff, provided the plan passes the IRS general nondiscrimination test annually. Age-weighted uses actuarial factors to give higher allocations to older participants since they have less time to accumulate retirement savings.
Step 2: Add Participants
Add each eligible participant with their name, role (owner/employee), age, and annual compensation. The IRS limits compensation that can be considered for plan purposes to $350,000 for 2025. The calculator automatically applies this compensation cap. You must include all employees who meet the plan's eligibility requirements — generally, those who are age 21 or older and have completed one year of service.
Step 3: Review the IRS Limits
For 2025, the maximum annual addition per participant is the lesser of $70,000 or 100% of their compensation under IRC Section 415(c). The employer deduction limit under IRC Section 404(a) is 25% of total eligible compensation for all participants combined. This means if your total payroll is $400,000, the maximum deductible employer contribution is $100,000, regardless of individual allocation amounts.
Step 4: Compare Plan Types
The plan comparison section shows estimated total plan cost and owner's allocation under each formula, letting you evaluate the trade-offs. New comparability plans can dramatically increase the owner's share of total contributions but require annual testing by a third-party administrator (TPA). Age-weighted plans are simpler to administer than new comparability but offer less flexibility. The profit sharing plan type you choose should match your workforce demographics and administrative budget.
Combining with Employee 401(k) Deferrals
Profit-sharing plans are commonly paired with a 401(k) plan so employees can also make elective deferrals. Employee deferrals ($23,500 in 2025, plus $7,500 catch-up for ages 50+) count toward the combined Section 415 limit of $70,000. If the owner contributes $47,500 in profit-sharing and makes a $23,500 employee deferral, the total $71,000 slightly exceeds the limit — the calculator flags when individual contributions would breach the cap.
FAQ
Is this profit sharing calculator free?
Yes, completely free with no signup required. All calculations run locally in your browser — no compensation or business data is ever sent to a server.
Is my data private?
Absolutely. Everything is computed in your browser. No participant data, compensation figures, or business information is stored or transmitted.
What is the IRS limit on profit-sharing contributions for 2025?
For 2025, the IRS annual addition limit under IRC Section 415(c) is the lesser of $70,000 or 100% of the participant's compensation. The employer deduction limit under IRC Section 404(a) is 25% of total eligible compensation for all participants combined.
What is a pro-rata profit sharing plan?
A pro-rata plan allocates contributions as an equal percentage of compensation to all eligible participants. If the contribution rate is 10%, every participant — owner and employee alike — receives 10% of their compensation. It is the simplest formula but gives the business owner no flexibility to contribute more to themselves relative to employees.
What is a new comparability profit sharing plan?
New comparability (also called cross-tested) plans allocate different contribution rates to different groups of employees, as long as the plan passes IRS nondiscrimination testing. This lets business owners contribute the maximum $70,000 to themselves while contributing far less (sometimes as little as 5%) to rank-and-file employees. It requires annual actuarial testing.
What is an age-weighted profit sharing plan?
Age-weighted plans allocate contributions based on each participant's age and compensation, using actuarial factors. Older participants get a higher allocation because they have fewer years until retirement to accumulate the same benefit. This often favors owner-employees who are older than their staff.
Can I combine a profit sharing plan with employee 401(k) deferrals?
Yes. A profit-sharing plan is typically paired with a 401(k) plan that allows employees to make elective deferrals. Both the employer profit-sharing contribution and the employee deferral count toward the overall Section 415 limit ($70,000 for 2025). Employees can defer up to $23,500 in 2025 on top of the profit-sharing contribution.
Do I need a third-party administrator (TPA) for a profit sharing plan?
For pro-rata plans, administration is relatively straightforward and many payroll providers can handle it. For new comparability and age-weighted plans, you will need a TPA to perform annual nondiscrimination testing (including the general test and gateway tests required by IRS regulations). TPA fees typically run $1,000 to $3,000 per year.