ESOP Contribution Calculator

Tax-deductible contributions for employee ownership

What is this? An ESOP (Employee Stock Ownership Plan) lets company owners transfer ownership to employees in a tax-advantaged way. Contributions to an ESOP are tax-deductible up to 25% of eligible payroll. S-Corp owners with ESOPs pay ZERO federal income tax on company profits.

The key benefits: Tax-deductible contributions fund the buyout of departing owners. Employees earn real ownership stake. The company gets a tax write-off equal to the contribution amount.

Who it's for: Business owners planning a succession, companies wanting to share ownership with employees, or anyone evaluating an ESOP as a retirement plan.
Company & Plan Details
Contribution Limits & Allocations
Max Deductible Contribution
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Shares Allocated (value)
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Per Employee Allocation
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Annual Tax Savings
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As % of Payroll
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Fully Vested After
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ESOPs are complex ERISA plans requiring professional administration. Consult an ESOP attorney and CPA before establishing a plan.

Retirement & Employee Benefits

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Frequently Asked Questions

What is the ESOP contribution limit for 2026?

The 2026 limit for elective deferrals to a 401(k) or SARSEP IRA is $23,500. If you are 50 or older, you can make additional catch-up contributions of $7,500, for a total of $31,000.

Can I contribute to both an ESOP and a 401(k)?

Yes — you can participate in both plans simultaneously. The contribution limits apply separately to each plan, but your total elective deferrals cannot exceed the annual limit.

What is the penalty for overcontributing to a 401(k)?

Excess contributions are taxed twice — once as income and again as a 10% penalty. Correct excess deferrals by April 15 of the following year to avoid the penalty.

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