Contribute to a Solo 401k, Roth IRA, and Traditional IRA for 2025

Contributions to Traditional IRAs and Roth IRAs Are Aggregated

Contributions to IRAs and Roth IRAs are aggregated. For 2025, the total contributions you make to all of your Roth IRAs and Traditional IRAs cannot exceed the following amounts:

Remains $7,000 ($8,000 if you’re age 50 or older), or
if less, your taxable compensation for the year

IRA and Roth IRA contribution limits
Year	Under age 50	Age 50 and older
2024	$7,000	$8,000
2025	$7,000	$8,000

This means that for 2025 you cannot contribute the above limit to each type (i.e., traditional and Roth IRA); however, you can contribute some to each up to the above combined limit.

2025 Traditional IRA Contributions May NOT be Fully Tax Deductible

While the IRS rules allow for contributions to both Solo 401k plans and IRAs, if you are also participating in a solo 401k plan, you can still make the traditional IRA contributions but they may not be tax deductible. See the chart listed below for these limits.

2025 Traditional IRA Contributions Limits if You Also Contribute to Your Solo 401k

If you contribute to your full-time employer 401k or your solo 401k plan, you may not be able to fully deduct your Traditional IRA contributions. Use this table to determine if your modified AGI affects the amount of your Traditional IRA deduction.

If Your Filing Status Is…	And Your Modified AGI Is…	Then You Can Take…
single or head of household	$79,000 or less	a full deduction up to the amount of your contribution limit.
single or head of household	more than $79,000 but less than $89,000	a partial deduction.
single or head of household	$89,000 or more	no deduction.
married filing jointly or qualifying widow(er)	$126,000 or less	a full deduction up to the amount of your contribution limit.
married filing jointly or qualifying widow(er)	more than $126,000 but less than $146,000	a partial deduction.
married filing jointly or qualifying widow(er)	$146,000 or more	no deduction.
married filing separately	less than $10,000	a partial deduction.
married filing separately	$10,000 or more	no deduction.

For the above chart, if you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the “single” filing status.

What happens if you contribute too much to your IRA?

If you contributed too much to your IRA, you have up until when your taxes are due to remove any excess contributions as well as any investment gains those contributions may have made. Those investment gains will have to be reported on your taxes.

If you don’t catch your excess contributions by your tax deadline, you may have to pay a 6% tax penalty on the excess amount each year until you remove those funds from the account.

ROTH IRA CONTRIBUTIONS

Roth Solo 401k contributions are not impacted by your modified AGI. While you can also contribute to a Roth IRA and a solo 401k plan, not everybody qualifies for making a Roth IRA contribution if their modified AGI is over a certain limit. For these limits, please see the chart below:

Amount of Roth IRA Contributions That You Can Make for 2025

This table shows whether your contribution to a Roth IRA is impacted by the amount of your modified AGI as computed for Roth IRA purpose.

If your filing status is…	And your modified AGI is…	Then you can contribute…
married filing jointly or qualifying widow(er)	< $236,000	up to the limit
married filing jointly or qualifying widow(er)	> $236,000 but < $246,000	a reduced amount
married filing jointly or qualifying widow(er)	> $246,000	zero
married filing separately and you lived with your spouse at any time during the year	< $10,000	a reduced amount
married filing separately and you lived with your spouse at any time during the year	> $10,000	zero
single, head of household, or married filing separately and you did not live with your spouse at any time during the year	< $150,000	up to the limit
single, head of household, or married filing separately and you did not live with your spouse at any time during the year	> $150,000 but < $165,000	a reduced amount
single, head of household, or married filing separately and you did not live with your spouse at any time during the year	> $165,000	zero

Year 2025 Solo 401k Contribution Limits

For 2025, the contribution limit increases to $70,000 or $77,500 if age 50 or over (The $7,500 catch-up contribution). However, starting in 2025, those ages 60 to 63 have a higher catch-up contribution limit of $11,250 instead of $7,500 thus resulting in being able to contribute $81,250. To learn more about the solo 401k contribution limits, visit here.

What happens if you contribute too much to your Solo 401k?

If you overcontribute to your solo 401k plan, the solo 401k excess contributions will need to be applied and are different depending on the type (i.e., employee vs employer) of excess solo 401k contribution.

First Determine the Excess Solo 401k Contribution Type

When removing excess contributions from a solo 401k plan, you first need to determine the type of contribution being removed. There are 2 (two) types of contributions that apply to a solo 401k plan.

Type 1 (one): Employee Contributions that exceed the annual limit

Type 2 (two): Employer/Profit Sharing Contributions

The Rules Are Different for Each Solo 401k Excess Contribution Type

The rules for removing the excess employee contributions vs the employer profit sharing contributions are different and are discussed below.

Here is what the IRS code says regarding removing Employee Contributions

If the excess salary deferral is not returned on or before April 15 of the following year, the contributing participant must pay income tax on the deferral both in the year of deferral and in the year of distribution. The deferrals are not included as after-tax assets even though they have previously been included in income in the year of deferral (IRC Sec. 402(g)(1) and (Treas. Reg. 1.402(g)-1(e)(8)). The earnings on the excess will be taxed in the year of distribution. Any corrective distribution of less than the entire amount of the excess deferral plus income is treated as a pro rata distribution of excess deferrals and income (IRC Sec. 402(g)(2)(D), Treas. Reg.1.402(g)-1(e)(10)).

You will need to work with your CPA in reporting the removal of excess employee contributions from your solo 401k plan on Form 1099-R.

For the excess employer contributions (profit sharing), here is what the rules state:

They will need to remain in the solo 40k plan and be treated as contributions in future years. However, a 10% penalty will need to be paid on the over contribution amount also known as the excess nondeductible contribution amount pursuant to (IRC Sec. 4972).

This penalty amount of 10% will need to be reported by the solo 401k owner by filing IRS Form 5330, Return of Excess Taxes Related to Employee Benefit Plans, and remit the penalty to the IRS.

Please refer to IRC Sec. 404(a)(1)(E) as it details that the amount of the otherwise deductible contribution that exceeds the limitation for any given year shall be carried forward indefinitely and applied to subsequent years.