Solo 401(k) Contribution Calculator

Two hats, two limits. As the employee you can defer $24,500, plus a catch-up of $8,000 from age 50, or $11,250 if you are 60 to 63. As the employer your business can add 20% of your net self-employment earnings if you are unincorporated, or 25% of your W-2 wages if you are incorporated. Total annual additions are capped at $72,000, and catch-ups sit on top of that, so the real ceiling is $80,000 at 50+ and $83,250 at ages 60 to 63.

Because the contribution is itself deductible, so applying 25% to a figure that already includes the contribution would be circular. IRS Publication 560 resolves this with an effective rate: 0.25 ÷ 1.25 = 0.20. A corporation avoids the problem entirely because its owner's W-2 wage is a fixed number that does not move when the contribution is made, so the full 25% applies there. On $100,000 of income that difference is $18,587 versus $25,000, which is why calculators that use 25% for everyone overstate what a sole proprietor can contribute.

Start with net profit from Schedule C. Multiply by 0.9235 to get net earnings from self-employment. Self-employment tax is 12.4% Social Security on those earnings up to the $184,500 wage base, plus 2.9% Medicare on the whole amount. Deduct half of that self-employment tax, and what remains is the base the 20% applies to. On $100,000 of net profit that is roughly $92,935, giving an employer contribution of about $18,587.

No, and this is the detail that catches people out. The $72,000 § 415(c) ceiling counts annual additions, your deferral plus the employer contribution, but specifically excludes catch-ups. So at 50 or older your true ceiling is $80,000, and at 60 to 63 it is $83,250. Catch-ups are still limited by your compensation, so you need the income to support them.

SECURE 2.0 created a higher catch-up of $11,250 for the calendar years you are 60, 61, 62 or 63. It replaces the standard $8,000 rather than adding to it, and it drops back to $8,000 in the year you turn 64. Your plan document has to allow it, so confirm with your provider before building a contribution plan around it.

Roughly $252,000 of net profit as a sole proprietor, because 20% of your net earnings has to cover the $47,500 of employer contribution left after your $24,500 deferral. As an S-corp you need about $190,000 of W-2 wages, since 25% of that reaches the same $47,500. Below those levels your income, not the IRS ceiling, is what limits you.

No. This is the most common misconception about the account. Both halves, your employee deferral and the employer contribution, reduce your income tax, but neither reduces self-employment tax, because SE tax is computed on net earnings before the retirement deduction. You still owe the full 15.3% on your net earnings up to the wage base.

Generally no, provided the two employers are genuinely unrelated. The § 415(c) limit applies per plan, so you can approach $72,000 in your solo 401(k) and also receive employer contributions in your workplace plan. Your $24,500 employee deferral, however, is shared across all 401(k) and 403(b) plans you take part in, so you cannot defer $24,500 twice. If you own a significant stake in the company that sponsors your W-2 plan, the two may be treated as one employer under the controlled group rules.

The plan document must be adopted by 31 December of the year you want to contribute for, the paperwork has to be signed, but the money does not have to be in by then. Employee deferrals for a sole proprietor can be funded up to the tax filing deadline including extensions; for an S-corp they must be withheld from W-2 wages during the calendar year. Employer contributions can be made up to the business filing deadline including extensions.

Yes, and it works in both directions. Only W-2 wages count as compensation for the 25%, so distributions do not help, but setting your own wage artificially high to inflate the contribution invites an IRS challenge. The wage has to be defensible for the work you actually do, which is why the comparison between a solo 401(k) and a SEP is not as one-sided as the headline percentages suggest.

Most solo 401(k) plans now offer a designated Roth account for the employee deferral, with no income limit on eligibility, unlike a Roth IRA. Since SECURE 2.0 the employer side can also be designated Roth, in which case the business still deducts it but you include it in taxable income that year. Not every provider has implemented the employer side yet, so confirm before relying on it.

A SEP has no employee deferral and no catch-up, it is only the employer half. On $100,000 of sole-proprietor net profit a SEP puts away roughly $18,587 against $43,087 in a solo 401(k), and the gap widens at 50 and older. SEPs win on simplicity: no plan adoption document, and no Form 5500 filing once the account passes $250,000.