A Solo 401(k) — also called an individual 401(k) — is a retirement plan for self-employed individuals with no full-time employees. It allows both employee deferrals (up to $23,500 in 2025) and employer profit-sharing contributions (up to 25% of net self-employment income), for a combined maximum of $70,000 ($77,500 if age 50+). The employer portion calculation differs between sole proprietors and S-corp/C-corp owners, which our calculator handles automatically.
For 2025, the employee deferral limit is $23,500 (plus $7,500 catch-up if age 50+). The employer profit-sharing portion can be up to 25% of net self-employment income. The total combined limit is $70,000 ($77,500 with catch-up). These limits are adjusted for inflation annually.
A Solo 401(k) generally allows higher contributions at lower income levels because it includes both employee deferrals and employer contributions. A SEP IRA only allows employer contributions (up to 25% of income). For most self-employed individuals earning under $350,000, the Solo 401(k) offers higher contribution limits.
Yes, you can contribute to both a Solo 401(k) and a traditional/Roth IRA in the same year. However, if you have significant income from the Solo 401(k), your traditional IRA contributions may not be tax-deductible. Roth IRA contributions are subject to income limits.
For sole proprietors, the employer contribution is based on net self-employment income minus half of self-employment tax, multiplied by 20% (not 25%). This is because the contribution is calculated on net earnings after accounting for the deduction of the contribution itself.
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