A Keogh plan is a tax-deferred, qualified retirement plan for self-employed individuals and unincorporated small businesses, such as sole proprietorships and partnerships. The Internal Revenue Service no longer uses the word “Keogh” as an official category. It now folds these arrangements into the broader group it calls qualified plans, also known as H.R. 10 plans (Source: IRS Publication 560, 2025).
A Keogh plan is a qualified retirement plan for self-employed people and unincorporated businesses. It can be a defined-contribution or defined-benefit plan. For 2026, total defined-contribution additions are capped at the lesser of 25% of compensation or $72,000, and the defined-benefit annual benefit is capped at $290,000 (Source: IRS Notice 2025-67).
What is a Keogh plan, in plain terms?
A Keogh plan is a qualified retirement plan that a self-employed person or an unincorporated business sets up to make tax-deductible retirement contributions. Contributions grow tax-deferred, and withdrawals in retirement are taxed as ordinary income. The defining feature is who may use it: the business must be unincorporated (Source: IRS Publication 560, 2025).
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The label “Keogh” is a historical name. IRS Publication 560 (2025) states the equivalence directly: “Qualified plans (also called H.R. 10 plans or Keogh plans when covering self-employed individuals).” In other words, a Keogh is not a separate product on a shelf. It is a qualified plan whose owner happens to be self-employed.
Because the IRS treats these plans under the general qualified-plan rules, the same three plan types apply: profit-sharing plans, money purchase pension plans, and defined benefit plans (Source: IRS Publication 560, 2025).
Keogh vs. HR-10 vs. qualified plan: why the terms confuse people
“Keogh,” “H.R. 10,” and “qualified plan” describe the same thing from different angles. IRS Publication 560 (2025) equates all three, noting that qualified plans are “also called H.R. 10 plans or Keogh plans when covering self-employed individuals.” The confusion comes from history, not from three different accounts existing today.
Where the name came from
The plan is named after Eugene James Keogh, a U.S. Representative from New York who championed the legislation that let self-employed people set aside tax-favored retirement money. Secondary financial sources commonly trace the enabling statute to the Self-Employed Individuals Tax Retirement Act, generally cited as 1962, and the bill number H.R. 10 gave the plan its other nickname.
Why the IRS dropped the word
Federal law once treated self-employed “Keogh” plans differently from corporate retirement plans, which is why a distinct name existed. Secondary sources attribute the end of that separate treatment to the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001. Current IRS guidance, including Publication 560 (2025), no longer treats “Keogh” as its own category, so the term is largely a legacy label today.
Who is eligible for a Keogh plan, and who is not?
A Keogh plan is available to unincorporated businesses: sole proprietorships, partnerships, and LLCs taxed as such. The self-employed owner establishes the plan and may cover eligible employees under the same terms. Eligibility turns on business structure and self-employment earnings, not on income level (Source: IRS Publication 560, 2025).
The people who cannot use one fall into clear buckets:
- Owners of incorporated businesses acting in that capacity. The “Keogh” label historically applied to unincorporated owners; an incorporated business sponsors a standard corporate qualified plan instead.
- Rank-and-file employees on their own. A worker cannot open a personal Keogh. Only the business owner sponsors it, though employees may participate once the owner establishes the plan and they meet its eligibility terms.
- People with no self-employment income. Contributions are based on net earnings from self-employment, so there must be qualifying business income to fund the plan (Source: IRS Publication 560, 2025).
How does a Keogh plan work? The two structural types
A Keogh works by letting an unincorporated business make pre-tax contributions into one of two structures: a defined-contribution plan or a defined-benefit plan. Defined-contribution plans fix how much goes in each year. Defined-benefit plans fix the retirement benefit and back into the funding. Both grow tax-deferred until withdrawal (Source: IRS Publication 560, 2025).
Defined-contribution Keogh plans
A defined-contribution Keogh sets the input, not the payout. The business decides how much goes in each year, within the annual limits, and the eventual retirement balance depends on the contributions made and how the investments perform over time. There is no guaranteed benefit amount, and the account carries investment risk. IRS Publication 560 (2025) identifies two defined-contribution structures used in this context:
- Profit-sharing plans. Contributions are flexible year to year. The business can vary or skip contributions based on cash flow, within the plan’s terms and the annual limits.
- Money purchase pension plans. Contributions are fixed as a set percentage of compensation each year, up to 25% of compensation, and the business is generally committed to funding that percentage annually.
Defined-benefit Keogh plans
A defined-benefit Keogh works like a traditional pension. Instead of setting the contribution, it sets a target annual retirement benefit, and an actuary calculates the yearly funding needed to reach that target. Because the funding is driven by an IRS actuarial formula tied to age, income, and years to retirement, an older high earner can sometimes contribute far more than a defined-contribution plan would allow (Source: IRS Publication 560, 2025).
Keogh plan contribution limits for 2026
For 2026, a defined-contribution Keogh is capped at the lesser of 25% of compensation or $72,000, up from $70,000 in 2025. A defined-benefit Keogh is limited by an annual benefit cap of $290,000 for 2026, up from $280,000 in 2025. These figures come from the IRS cost-of-living adjustments in Notice 2025-67 (Source: IRS Notice 2025-67).
The table below shows the headline retirement-plan limits for 2026 against 2025. Not every line applies to every Keogh: the elective-deferral and catch-up figures apply to plans with an employee salary-deferral feature, such as a Solo 401(k), not to a pure profit-sharing or money-purchase Keogh.
| Limit (IRC section) | 2025 | 2026 |
|---|---|---|
| Defined-contribution annual additions, 415(c) | $70,000 | $72,000 |
| Defined-benefit annual benefit, 415(b) | $280,000 | $290,000 |
| Annual compensation limit, 401(a)(17) | $350,000 | $360,000 |
| Elective deferral (401(k)-type), 402(g) | $23,500 | $24,500 |
| Age-50 catch-up, 414(v) | $7,500 | $8,000 |
| Ages 60-63 higher catch-up, 414(v) | $11,250 | $11,250 |
Two catch-up rules matter for older savers who use a deferral-based plan rather than a plain Keogh. The SECURE 2.0 Act of 2022 created a higher catch-up of $11,250 for participants ages 60 through 63 for both 2025 and 2026, and participants whose prior-year wages exceed $150,000 for 2026 generally must make catch-up contributions as designated Roth (Source: IRS Notice 2025-67; IRS Publication 560, 2025). Neither applies to a profit-sharing or money-purchase Keogh, which has no salary-deferral feature.
Why a self-employed owner cannot simply contribute 25%
Self-employed owners cannot apply the plan’s stated percentage directly to net profit. The IRS requires a circular “reduced rate” calculation that nets out the deduction for one-half of self-employment tax and the contribution itself. The formula is: reduced rate = plan rate divided by (1 plus plan rate) (Source: IRS, “Self-employed individuals: Calculating your own retirement plan contribution and deduction”).
In practice, a 25% plan rate becomes an effective 20% of net self-employment earnings, and a 10% plan rate becomes roughly 9.0909% (Source: IRS, same worksheet). This is why a self-employed owner’s real ceiling is often described as “20% of net earnings,” and why many use the Publication 560 rate table or a tax professional to run the number.
How a Keogh plan is taxed
A Keogh follows the standard tax pattern of a pre-tax qualified plan. Contributions are generally tax-deductible in the year made, investments grow tax-deferred, and distributions in retirement are taxed as ordinary income. A true Keogh holds pre-tax dollars only; it does not have a built-in Roth option (Source: IRS Publication 560, 2025). Depending on the plan’s trust document and the custodian, a Keogh can generally hold a range of investments such as stocks, bonds, mutual funds, and certificates of deposit.
Early withdrawals and required distributions
Distributions taken before age 59.5 are generally subject to a 10% additional tax on the taxable portion, on top of ordinary income tax, unless an exception applies (Source: IRS Topic No. 558). Recognized exceptions include separation from service at age 55 or later, a series of substantially equal periodic payments under section 72(t), disability, and certain medical expenses above 7.5% of adjusted gross income (Source: IRS Topic No. 558).
On the back end, required minimum distributions from a qualified plan generally must begin at age 73 under current rules, rising to age 75 for individuals born in 1960 or later beginning in 2033 (Source: IRS, Retirement plan and IRA required minimum distributions FAQs). Because those withdrawals are taxed as ordinary income, some savers coordinate them with other planning moves, including the timing of a Roth conversion, to manage which years carry the heaviest taxable income. You can read more in our overview of required minimum distributions for 2026.
Paperwork and Form 5500
Keogh plans carry heavier administrative duties than IRA-based accounts. A defined-benefit Keogh needs an actuary, and defined-contribution plans require ongoing recordkeeping. For a one-participant plan, once total plan assets exceed $250,000 at the end of the plan year, the plan generally must file IRS Form 5500-EZ annually, and setup and maintenance costs are higher than for simpler self-employed accounts (Source: IRS, 2025 Instructions for Form 5500-EZ; IRS Publication 560, 2025).
Keogh vs. SEP-IRA vs. Solo 401(k): which fits?
For most self-employed savers, a SEP-IRA or a Solo 401(k) reaches similar dollar limits with far less paperwork than a Keogh, which is why those two accounts have largely replaced the traditional Keogh. The defined-benefit Keogh keeps a narrow edge in one case: an older, high-earning owner who wants to contribute well above the defined-contribution cap (Source: IRS Publication 560, 2025).
| Feature | Keogh (qualified plan) | SEP-IRA | Solo 401(k) |
|---|---|---|---|
| Who it is for | Unincorporated self-employed and their eligible employees | Self-employed and small employers | Owner-only businesses (and spouse) |
| 2026 defined-contribution cap | Lesser of 25% comp or $72,000 | Lesser of 25% comp or $72,000 | Up to $72,000 (deferral plus profit share) |
| Defined-benefit option | Yes, up to $290,000 benefit (2026) | No | No |
| Roth contributions | No (pre-tax only) | Roth SEP allowed under SECURE 2.0, plan permitting | Yes, if the plan offers a Roth account |
| Administrative burden | Higher; Form 5500-EZ once assets exceed $250,000; actuary for DB | Low | Moderate; Form 5500-EZ once assets exceed $250,000 |
The Roth point is where popular articles get muddy, so here it is plainly: a true Keogh accepts pre-tax money only. A saver who wants Roth treatment inside an owner-only plan generally uses a Solo 401(k) with a designated Roth account rather than a Keogh. Rolling a pre-tax Keogh balance into Roth is a separate, taxable conversion event with its own rules.
Where a Keogh may still have an edge is the defined-benefit case. An owner in their 50s or 60s with high, stable self-employment income and few or no employees may be able to fund a defined-benefit plan above the $72,000 defined-contribution ceiling, because the actuarial formula can support larger deposits toward the $290,000 benefit target for 2026 (Source: IRS Notice 2025-67). That extra capacity comes with actuarial cost and a funding commitment, so it suits a narrow profile rather than the average freelancer.
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Q3 Advisors is a registered investment adviser focused on retirement tax planning. This article is educational and is not advice; for guidance on your own circumstances, consult a qualified tax or financial professional.
Frequently asked questions
These questions come up most often when self-employed savers compare a Keogh with other retirement accounts. The answers below summarize how a Keogh is defined, who may use it, how it is funded and taxed, and how it differs from a 401(k) and an IRA, with dollar figures drawn from current IRS guidance for the 2026 tax year.
What is the difference between a Keogh plan and a 401(k)?
A Keogh is a qualified plan for unincorporated self-employed businesses, and it can be structured as a defined-contribution or defined-benefit plan with no employee salary-deferral feature in its classic forms. A 401(k) is an employer plan built around employee salary deferrals, with a 2026 elective-deferral limit of $24,500. An owner-only business often uses a Solo 401(k) for its deferral and Roth flexibility (Source: IRS Notice 2025-67).
What is the difference between a Keogh plan and an IRA?
The main difference is capacity and complexity. A Keogh can accept more than an IRA: up to $72,000 in a defined-contribution plan for 2026, versus a $7,500 IRA base limit (Source: IRS Notice 2025-67). A Keogh also requires more administration, including possible Form 5500-EZ filing once a one-participant plan’s assets exceed $250,000 (Source: IRS, 2025 Instructions for Form 5500-EZ). Both can generally hold investments such as stocks, bonds, mutual funds, and CDs, depending on the custodian.
How does a Keogh plan work?
An unincorporated business sets up the plan and makes pre-tax contributions into either a defined-contribution structure (profit-sharing or money purchase) or a defined-benefit structure. Contributions are generally deductible, growth is tax-deferred, and retirement withdrawals are taxed as ordinary income. Self-employed owners use an IRS reduced-rate formula, so a 25% plan rate equals 20% of net earnings (Source: IRS Publication 560, 2025).
Who can benefit from using a Keogh plan?
Self-employed people and unincorporated businesses with strong, stable earnings who want to contribute more than an IRA allows may find a Keogh useful. The defined-benefit version can suit an older, high-earning owner with few employees who wants to fund above the $72,000 defined-contribution cap for 2026, accepting higher cost and paperwork in exchange (Source: IRS Notice 2025-67).
Who is not eligible for a Keogh plan?
Owners of incorporated businesses acting in that capacity, employees trying to open a plan independently, and anyone without net self-employment earnings cannot establish a Keogh. It is limited to self-employed individuals and unincorporated businesses such as sole proprietorships and partnerships. Eligible employees may participate only after the owner sponsors the plan (Source: IRS Publication 560, 2025).
Is a Keogh plan the same as an HR-10 plan?
Yes. IRS Publication 560 (2025) uses “H.R. 10 plans” and “Keogh plans” as alternate names for qualified plans covering self-employed individuals. The H.R. 10 label comes from the bill number of the original enabling legislation. Today the IRS files both terms under the general category of qualified plans rather than treating Keogh as separate (Source: IRS Publication 560, 2025).
What factors determine my benefits received at retirement?
In a defined-contribution Keogh, your retirement amount depends on how much was contributed and how the investments performed. In a defined-benefit Keogh, an actuary sets funding from a formula based on your target benefit, age, compensation, and years to retirement, subject to the $290,000 annual benefit cap for 2026 (Source: IRS Notice 2025-67).
Sources
IRS Publication 560, Retirement Plans for Small Business (2025): https://www.irs.gov/publications/p560
IRS Notice 2025-67, 2026 cost-of-living adjustments (IR-2025-111): https://www.irs.gov/pub/irs-drop/n-25-67.pdf
IRS newsroom, 401(k) limit increases to $24,500 for 2026: https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
IRS, Self-employed individuals: Calculating your own retirement plan contribution and deduction: https://www.irs.gov/retirement-plans/self-employed-individuals-calculating-your-own-retirement-plan-contribution-and-deduction
IRS Topic No. 558, Additional tax on early distributions: https://www.irs.gov/taxtopics/tc558
IRS, Retirement plan and IRA required minimum distributions FAQs: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions
IRS, 2025 Instructions for Form 5500-EZ (Annual Return of a One-Participant Retirement Plan): https://www.irs.gov/pub/irs-pdf/i5500ez.pdf
IRS Notice 2024-80, 2025 cost-of-living adjustments: https://www.irs.gov/pub/irs-drop/n-24-80.pdf
