Section 415 of the Internal Revenue Code [I.R.C. 415(c)] is where you can find the contribution limits that apply to 401k plans including solo 401k plans.
Section 415(d) requires that the Secretary of the Treasury annually adjust the 401k including solo 401k contribution limits based on the cost-of-living increases.
One’s contributions to a Solo 401k can’t exceed the self-employment compensation (i.e. one can’t save more than they earn).
Moreover, one can only make Solo 401k contributions based on one’s earned self-employment income (i.e. one can’t use w-2 wages from one’s day job to make such contributions).
What is Earned Income for Solo 401k Contribution Purposes?
You can only make solo 401k contributions if you have net earnings from work performed in your trade or business.
Net earnings must be derived from personal services (not investment income) performed by the self-employed business owner. If the trade or business operates at a loss for the year, you will not be able to contribute to the plan.
If you fully own more than one business ( they are under your control) and have net earnings from each business, then contributions to the solo 401k plan will be based on net earnings from each business. VISIT HERE for more on this aggregation rule.
For a Partnership (e.g., an LLC taxed as a Partnership)
For an LLC taxed as a partnership, earned income from self-employment must be received for services that materially helped produce the income.
For example, a partner may provide investment capital to the LLC but does not work for the LLC. In this case, any revenue generated from the LLC will not be considered eligible compensation for the partner as she did not provide a personal service that materially produced income for the LLC.
A quick way to determine if the partner generated any self-employment income form the LLC taxed as a partnership is to reviewline 14 Code A of Schedule K-1.
Self Employment Income Compensation Limits for 2025 and 2026
For 2025, the maximum self-employment income compensation for figuring solo 401k contributions is $350,000. This self employment compensation limit increased to $360,000 for 2026.
IRS records show that, in Tax Year 2014, an estimated 53 million taxpayers contributed almost $255 billion to tax-qualified deferred compensation plans. A popular form of deferred compensation plans, known as a solo 401(k) plans, permits employees to save for retirement on a tax-favored basis.
With a Solo 401(k), depending on your salary and age, you can contribute $70,000 per year or $77,500 for those 50 or older in 2025. 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.
For 2026
For 2026, the contribution limit increases to $72,000 or $80,000 if age 50 or over (The $8,000 catch-up contribution). The super catch-up contribution remains the same at $11,250 and is only available to those ages 60 to 63 instead of $8,000, resulting in being able to contribute $83,250.
Solo 401k contributions are based net- income from self-employment (i.e. you can’t contribute more than you make).
Contributions to a Solo 401(k) consist of two types
Type 1
Year 2025: Elective Deferral (401k) also known as Employee Contributions. The maximum elective deferral is $23,500 in 2024, or $31,000 if age 50 or older. A super catch-up amount of $11,250 is available for 2025 for participants who are age 60,61,62 or 63 instead of the normal $7,500 catch-up.
Year 2026: For 2025, the elective deferral increased to $24,500, or $32,500 if age 50 or older. Also, a super catch-up amount of $11,250 is available for 2026 for participants who are age 60,61,62 or 63 instead of the normal $8,000 catch-up.
Type 2
Profit sharing also known as Employer Contribution. This amount cannot exceed $70,000 for 2025. For 2025, this amount cannot exceed $72,000.
If your business type is a Corporation, the maximum profit sharing contribution is 25% of the employees W-2 gross income and still subject to the above profit sharing amounts.
If your business type is a Sole Proprietor/Partnership, the maximum profit sharing contribution is 20% of net income and still subject to the above profit sharing amounts.
*IMPORTANT
If you decide to take the full $24,500 for the elective deferral (Type 1), you are limited to making $47,500 in profit-sharing contributions (Type 2) so that your total contributions do not exceed $72,000 for 2026.
For 2025, If you decide to take the full $23,500 for the elective deferral (Type 1), you are limited to making $46,500 in profit-sharing contributions (Type 2) so that your total contributions do not exceed $70,000.
Note: Catch-up contributions are allowed for participants who are at least age 50 by year-end.
SECURE 2.0 Modified Catch-Up Contributions Starting in 2026 for S-corporations, C-corporations, and LLCs taxed as S-corps., or C-corps.
Starting in 2026, The Act requires solo 401k catch-up contributions made to the Roth solo 401k if the self-employed individual earned $150,000 (indexed for inflation) in the prior year, so in 2025, or more of self-employment income. This provision does not apply to sole proprietorship, partnership, or LLC self-employed businesses taxed as as a sole proprietorship or as a partnership.
Note 1: With the passage of SECURE 2.0 Act on December 29, 2022, the employer/profit sharing contribution can now also be applied as a Roth solo 401k contribution or can continue to be made as a pretax contribution.
Note 2: The Roth solo 401k contributions can be applied as employee and/or or employer contributions. However, the catch-up contribution for those aged 50 or older can only be made from the employee contribution source.
For 2025:Therefore, if age 50 or older in 2025 the employee Roth solo 401k contribution is $31,000 ($23,000 + $7,500). However, if you are age 60, 61, 62 or 63 in 2025 the catch-up contribution increases to $11,250 from $7,500 for tax year 2025.
For 2026, if you are aged 50 or older, the employee Roth solo 401k contribution increased to $32,500 ($24,500 + $8,000). However, if you are age 60, 61, 62 or 63 in 2026 the catch-up contribution increases to $11,250 from $8,000 for tax year 2026.
Note 3: Catch-up contributions are allowed for participants who are at least age 50 by year-end.
Note 4: Super Catch-up contributions are allowed for participants who are at least age 60, 61, 62, or 63 by year-end.
Note 5: Starting for tax year 2026, you may not be able to treat normal catch-up or super catch-up contributions as Roth solo 401k contributions. Visit here to learn more.
Rollover Contributions and Direct Transfer
You may “roll over” into your Solo 401(k) amounts you have in another 401(k), a governmental 457(b) plan or a 403(b) plan. You may also “roll over” amounts you have in an IRA (other than a Roth IRA) into your Solo 401(k).
There are no limits on the amount that you can Rollover or Transfer.
Plan Year 2025 Annual Solo 401k Contribution Deadlines
The solo 401k contribution deadlines depend on your self-employed business type and business tax return due date. Contributions to a solo 401k plan must be made by your business tax return due date plus timely filed extensions.
Plan Year 2026 Annual Solo 401k Contribution Deadlines
Contribute to Multiple 401(k) Plans
To learn how to shelter more of your earnings,click here.
Solo 401k Contribution Calculation is Based on Type of Self-Employed Business
Roth solo 401k and voluntary after-tax contributions are not tax deductible, but pretax solo 401k contributions are deductible. Claiming the pretax contribution deduction is driven by the type of self-employed business sponsoring the solo 401k plan. See the following chart to determine where to claim pretax solo 401k contributions.
2024 & 2025 Solo 401k Contribution Guides-Deep Dive
Sole Proprietorship, Independent Contractor, Schedule C, LLC Taxed as Sole Proprietorship, 1099-NEC Independent Contractor
Generally, any business may adopt a Solo 401(k). The business need not assume any particular legal form. Thus, a self-employed business owner, a partnership, a limited liability company (LLC), or any type of corporation (including a Sub-chapter S corporation) may adopt a Solo 401(k).
For 2023, in order to make employee contributions for 2024, the self-employed business owner has to establish/adopt (i.e., sign the solo 401k establishment documents including the Adoption Agreement) by December 31, 2024. However, if the plan is established on January 1, 2025 or after by your business tax return due date including the business tax return extension, then you cam still make employer profit sharing contributions for 2024 but cannot make employee contributions. For example, an employer operating the plan on a calendar-year basis has to complete the solo 401k plan documentation no later than December 31, 2022.
December 31, 2022 Solo 401k Setup Deadline QUESTION:
If you are self-employed and open a solo 401k plan by December 31, 2024, you will be able to wait until next year (2025) to contribute $69,000 plus an additional $7,500 if you turn 50 in 2024 or are already over age 50. This essentially means that you simply need to sign the solo 401k documents by December 31, 2024 so that you can wait until next year to both open the solo 401k bank account and make both annual solo 401k contribution types (employee and employer).
Change in Business Name Affect on Contributions QUESTION:
You can still setup the solo 401k in 2024 under your LLC business. Next year in 2025, we can update the plan to list the new self-employed business. All else would remain the same (e.g., same plan name, same bank account for the solo 401k, etc.). The 2024 annual solo 401k contributions would be based on your new self-employment income and you would have until 2025 to make those contributions.
Yes, provided you each spouse separately has the necessary net self-employment income to satisfy said contribution amounts, as solo 401k contributions are based on each participants separate (NOT the combined) net self-employment income. For example, if the self-employed business is an LLC that is taxed as as sole proprietorship, both spouses will need to file a separate Schedule C and their solo 401k contributions will be based on their respective Schedule C net self-employment income figure, so line 31 of the Schedule C.
Good question and the answer is yes. In order for either spouse to contribute to the solo 401k plan, whether employee or employer contributions, the spouse that wants to contribute to the solo 401k plan has to have net self-employment income.
First, your wife's contributions have no impact on your contributions because the contribution limits are per participant. However, you are correct that employee contributions (Type 1) are capped at $23,000 for tax year 2022 (plus a $7,500 catch-up if age 50 or older in 2024) between all 401k plans. Therefore, if your wife has already maxed out the $23,000 employee contribution (Type 1) to her day job 401k plan for 2024, then she can only make the profit sharing contribution (Type 2) to the solo 401k plan and it would be based on her net self-employment income from the business that sponsors the solo 401k plan. You on the other hand, can make both the employee (Type 1) and profit sharing contributions (Type 2) to the solo 401k plan if you have net self-employment income and have not contributed to any other 401k plan.
While one of the benefits available under a retirement plan such as a solo 401k plan is the ability to make annual contributions even if you are over age 73, you are not required to make annual solo 401k contributions in order to continue with the solo 401k plan.
Because a solo 401k plan is only for owner-only businesses, equal contributions do not apply; therefore, just one spouse can contribute while other does not.
Contribute to Solo 401k and Day-Time Job 401k QUESTION:
Your wife's ability to contribute to a solo 401(k) depends on the self employment income that she receives from the partnership. Specifically, in order to determine how much she could contribute to the solo 401(k) she would take the amount reported on line 14 of her K-1 and reduce it by one half of the self-employment tax. Of that number, she could contribute for 2022: (i) up to $27,000 as an employee contribution (less any amount contributed as an employee contribution to her 401(k) plan sponsored by her daytime employer); and (ii) a profit-sharing contribution to the solo 401(k) equal to 20% of that same number (i.e. line 14 from her K-1 -1/2 of the self-employment tax) provided that her overall contribution to the solo 401(k) cannot exceed $67,500 for 2022. For 2023, the overall limit is $73,500.
Have you made any SIMPLE IRA contributions for 2022? If you have not, do not make it to the SIMPLE IRA if the SIMPLE IRA is also for your self-employed business, as the IRS rules do not allow contributions in the same year to both a solo 401k and a SIMPLE IRA.
You don't need to inform us of the contribution or submit a contribution form. However, you will need to report the contribution to the IRS when you file your taxes. Also, you can use the annual contribution form located on our forms page to internally document the annual contribution.
It depends on whether or not those guaranteed payments are reported on line 14 of the K-1, as contributions to a solo 401k plan must be based on earned income from self-employment activity not passive or investment income.
Correct since earned income for an S-corp is reported on a W-2. Both the employee and profit sharing contribution is based on W-2 wages, and each spouse, provide they receive W-2 wages from the self-employed business, can make solo 401k contributions.
Yes since a timely business tax return extension was filed. The solo 401k contribution rules allow for contributions of both the employee and employer by September 15 if a tax return extension is timely filed. See IRS Publication 560 for more information surrounding the contribution deadlines.
Tax Deductible IRA Contributions if I have a Solo 401k QUESTION:
My question: As my wife and I are *not* contributing to our solo401k plan, does that mean that we are not active participants and IRA contributions are tax deductible? (We do exceed the MAGI levels.) "]
Good question. Yes, you are still considered “covered by a retirement plan at work” even if you are not making solo 401k contributions.
While you can still contribute to a traditional IRA, your traditional IRA contribution deductions will be reduced (phased out) if your AGI is a certain amount.
For 2024, if you are covered by a retirement plan including a solo 401k plan, your deduction for contributions to a traditional IRA is reduced (phased out) if your AGI is:
More than $123,000 but less than $143,000 for a married couple filing a joint return or a qualifying widow(er),
More than $77,000 but less than $87,000 for a single individual or head of household, or
Less than $10,000 for a married individual filing a separate return.
In short your understanding is correct, as solo 401k is not subject to the safe harbor rules since it is 401k for owner-only employees. Same with vesting, all contributions are fully vested immediately because it is a 401k plan sponsored by a self-employed business with no common law employees.
Already Paid Payroll Tax Through Employer QUESTION:
Good question. While you have already paid all of you payroll taxes (i.e., social security and Medicare) through your W-2 employer, this has no impact when calculating the solo 401k contribution as the contribution still requires the reduction of 1/2 of self-employment tax if the self-employed business is a sole proprietorship.
In other words, the fact that you have already paid some or the maximum payroll tax through your day job means that you may or may not owe additional social security and Medicare tax, but this does not mean that 1/2 of self-employment tax does not need to be reduced from line 31 of Form Schedule Cwhen performing the solo 401k contribution calculation.
Yes you would need to change / restate the individual 401k to our solo 401k plan this year in 2024 in order to preserve the right to make Roth and/or after-tax contributions for 2024 by your tax return deadline next year in 2025.
Because they used code "G" in box 7 of Form 1099-R, that means they already treated the movement of the IRA funds to the solo 401k plan as a nontaxable direct-rollover (IRA to solo 401k plan); therefore, the Form 1099-R that you received from E-TRADE is for your records and does not get filed with the IRS as E-TRADE will also submit a copy to the IRS.
Essentially, by using code "G," they are communicating to the IRS that the IRA direct-rollover check was deposited into the solo 401k account not your personal bank account.
Pre-tax contributions to a 401k are exempt from federal taxes as well as most state and local taxes. You may wish to check with your state and/or local tax agencies. Here is a link to the state tax agencies: https://www.irs.gov/tax-professionals/government-sites
From a Solo 401(k) perspective, what matters is that the contributions (employee and employer) are made based on W-2 wages. Therefore, regardless if the funds first flow from the Corporation bank account to your personal bank account and then to the solo 401k plan, it will still satisfy the solo 401k contribution rules (i.e., both the employee and employer contributions were made by your business tax return due date and were based on W-2 wages from the S-corporation).
Extension Apply to Both Contribution Types QUESTION:
Self-directed 401k contributions (both employee and employer) deadlines are based on the type of entity sponsoring the solo 401k so you are correct. Please see the following.
If the entity type is a Sole Proprietorship, the annual solo 401k contribution deadline is April 15, or October 15 if tax return extension is timely filed.
If the entity type is an LLC taxed as an S-Corporation (calendar year), the annual solo 401k contribution deadline is March 15, or September 15 if tax return extension is timely filed.
If the entity type is an LLC taxed as a Partnership (calendar year), the annual solo 401k contribution deadline is March 15, or September 15 if tax return extension is timely filed.
If the entity type is a Partnership (calendar year), the annual solo 401k contribution deadline is March 15, or September 15 if tax return extension is timely filed.
If the entity type is an S-Corporation (calendar year), the annual solo 401k contribution deadline is March 15, or September 15 if tax return extension is timely filed.
If the entity type is an C-Corporation (calendar year), the annual solo 401k contribution deadline is April 15, or September 15 if tax return extension is timely filed.
Do Direct-Rollovers Impact Annual Contribution Limits QUESTION:
No direct-rollovers from an IRA to a Solo 401(k) plan do not count towards your annual contribution to the solo 401k plan. You can directly rollover unlimited amounts from an IRA to a Solo 401(k) plan without affecting your annual Solo 401(k) contribution limits. We will prepare an IRA transfer form as your solo 401k provider.
Income Earned From Non-Professional Trustee QUESTION:
No it cannot because the fees received by such individuals are not subject to SE tax and are not earned income for solo 401k or IRA contribution purposes.
No. Matching contributions only apply to full-time employer 401k plans, not self-employed solo 401k plans (i.e., 401k plans for owner-only businesses). A solo 401k only consists of employee and profit-sharing contributions. Matching is when the employer matches what the employee has contributed. Profit-sharing contributions are employer contributions as well but are not based on whether the non-owner employee has contributed.
Roth IRA Conversion Effect On Solo 401k Contributions QUESTION:
No; any amounts converted from a traditional IRA to a Roth IRA would not
have an impact on self-employment income; therefore, the owner-only business owner can make annual solo 401k contributions regardless of any Roth IRA conversions processed during the year.
The solo 401k contribution is based on net self-employed income so line 31 of Schedule C. You then plug line 31 into our solo 401k contribution calculator to determine the allowed solo 401k contribution amount, as the calculator will subtract 1/2 of self-employment income tax when performing the calculation. Visit here to view our sole proprietor page.
The amount of self-employed income subject to payroll taxes or self-employment tax is earned compensation. The medical reimbursement income is not able to be used to justify a higher contribution to the solo 401k unless the reimbursement amount is included in box 1 (one) of the W-2 (e.g. such amounts may be included in box 1 of the w-2 issued to greater than 2% S-Corp Shareholders.
All Three (3) Contribution Types QUESTION:
Distinguishing 2022 from 2023 Contributions QUESTION:
You will differentiate your 2023 contributions (both the employee and employer), which can be made by your business tax return plus timely filed extension, from your tax year 2024 contributions by reporting them in the appropriate years Form 1040 tax return since your self-employed business is a sole proprietor.
Outstanding Solo 401k Participant Loan Contributions QUESTION:
As long as the individual has net self-employment income from the self-employed business that sponsors the solo 401k plan, solo 401k contributions are permitted even if the participant has outstanding solo 401k participant loans.
In short yes. It is important to first understand the total contribution limit to a solo 401k cannot exceed $69,000 for 2024, not counting the catch-up contributions for those age 50 and over. The contributions made to the Roth solo 401k designated account will reduce the amount of contributions that you can make to the pretax solo 401k designated account. If you only employee contribution may be made to the Roth solo 401k; you make the full $23,000 employee contribution to the Roth solo 401k for 2024, then you won't be able to make any employee contribution to the pretax solo 401k because you will have exhausted the full $23,000 employee contribution on the Roth solo 401k. Note that you can also split up the $23,000 employee contribution between both the pretax solo 401k and Roth solo 401k designated accounts. Lastly, for 2024 you also have an additional $7,500 of catch-up contributions to work with if you are age 50 or older in 2024 since the catch-up contribution falls under the employee contribution umbrella and can thus be allocate between the Roth solo 401k and the pretax solo 401k designated account.
Mega Back Door Roth Solo 401k Contribution Limit QUESTION:
The overall limit in 415C (i.e. $69,000 for 2024, and $76,500 for 2024) applies on a per employer basis Provided that the employers are unrelated.
This limit is applied without consideration of contributions made to a plan sponsored by an unrelated employer
The elective deferral limit in 402G (i.e. $23,000 for 2024) applies only to elective deferrals and does not impact after-tax contributions
Here is an Example:
For 2024, an individual contributes $23,000 of the elective deferrals to a 401(k) plan sponsored by his W-2 employer & additional matching and profit-sharing contributions are made up to the limit of $69,000
Individual has an S-corp side business with no employees that generates self-employment income (i.e. compensation) greater than $69,000 for 2024.
The individual can contribute after-tax contributions up to $69,000 for 2024 to the solo 401(k) sponsored by side business and subsequently convert the voluntary after-tax funds to a Roth IRA or to the Roth Solo 401k.
Treating Employer Profit Sharing Contributions as a Roth Solo 401k Contribution QUESTION:
Yes, the SECURE 2.0 Act of 2022 now allows for the treatment of employer profit sharing contributions as Roth solo 401k contributions. Prior to the passage of the Act, employer profit sharing contributions had to be applied on a pretax basis which made them tax deductible. We suspect the reason for this new change is to alleviate having to then process an in-plan Roth solo 401k conversion for those business owners who ultimately planned to convert the contribution to the Roth solo 401k designated account.
Solo 401k for a Partnership (one plan or a separate plan for each partner) QUESTION:
The solo 401k would be sponsored by the partnership. As a result, the partners would participate in the same solo 401k plan, with each partner having separate holding accounts (aka participant accounts to hold their respective contributions/fund sources (e.g., pretax, Roth and voluntary after-tax funds).
Contributions can come from either the business or personal account provided that you have the required self-employment income to support the contribution amount.
Contributions for a Disregarded LLC Entity QUESTION:
If the LLC is taxed as a sole proprietorship then both the employee and the employer contributions are based on your Schedule C line 31 figure, and the employer contribution is 20% of line 31 after 1/2 of self-employment tax has been subtracted.
