The IRS rules place salary limits for making annual solo 401k contributions. These salary/compensation limits are generally adjusted annually for cost-of-living increases in accordance with Code section 401(a)(17)(B).
Solo 401k Contribution Types
- Employer profit sharing contributions: are always made on a pretax basis and are tax deductible on the business tax return.
- Pretax employee salary deferral contributions: are tax deductible on the individuals tax return (i.e., Form 1040).
- Roth designated employee contributions: are a type of employee contribution that, unlike pre-tax employee contributions, are currently includible in gross income but tax-free when distributed.
- Employee voluntary after-tax contributions: are not excluded from income and cannot deduct them on your tax return.
- Catch-up employee contributions: can only be made if the participant is age 50 or over at the end of the calendar year, and cannot be applied as a voluntary after-tax contribution.
Following are the self-employment income salary limits for 2019, 2020 and 20201 for making self-directed solo 401k contributions.
|Self-Directed Solo 401(k)||2021||2020||2019|
|IRA Contribution Limit||$6,000||$6,000||$6,000|
|IRA Catch-Up Contributions||1,000||1,000||1,000|
|Traditional IRA AGI Deduction Phase-out Starting at||2021||2020||2019|
|Single or Head of Household||66,000||65,000||64,000|
|SEP Minimum Compensation||650||600||600|
|SEP Maximum Contribution||58,000||57,000||56,000|
|SEP Maximum Compensation||290,000||285,000||280,000|
|SIMPLE Maximum Contributions||13,500||13,500||13,000|
- Limits by plan type (IRA, 401(k), SEP, SIMPLE IRA, 403(b), 457(b), defined benefit)
- 2021 cost-of-living adjustments for pension plans and retirement-related items (IR-2020-244)
- COLA Table for prior years’ dollar limitations and Internal Revenue Code references.