Solo 401(k) Contribution Calculator
The Solo 401(k) contribution calculator is a financial tool designed to help self-employed individuals and small business owners with no full-time employees determine how much they can contribute to their Solo 401(k) plan. This type of plan is specifically for sole proprietors, freelancers, small business owners, and other individuals who have earned self-employment income on the year.
Name: Identifies who created the worksheet.
Age: Your current age. Once you reach the age of 50, a catch-up contribution will be factored into your totals.
Income (numbers only): For sole proprietors, this is your net income from your Schedule C. For corporations, this is the amount of W-2 wages.
Business Entity: Choose the type of business you have: corporation, partnership, or sole proprietorship.
Plan Year: Choose the plan year you wish to contribute to. Limits change annually.
Frequently Asked Questions (FAQs)
To be eligible to benefit from the Solo 401(k) plan, investors must meet two eligibility requirements:
- The presence of self-employment activity.
- The absence of full-time employees.
Contributions are divided into two components:
- Elective Deferral Up to 100% of earned income, capped at $22,500 for 2024 if you are under the age of 50, or $30,000 if age 50 or older. For 2025, those numbers are $23,000 and $30,500 respectively.
- Profit Sharing: Up to 25% of your net self-employment income (or 20% for sole proprietors or single-member LLCs), with a combined total contribution limit (employee + employer) of $66,000 for 2024, or $73,500 you are 50 or older. For 2025, that number is increased by $1,000.
- “Bonus Catch-Up”: Beginning in 2025, those between the age of 60 and 63, may contribute $11,250, which is 50% more than the standard catch-up contribution.
Employee contributions must be elected by December 31 of the plan year but can be funded by the tax-filing deadline (including extensions) for the year. Employer contributions must be made by the business’s tax-filing deadline, including extensions.
Traditional, pretax contributions are tax deductible. Taxes are deferred until you take distributions during retirement. Roth 401(k) contributions are not tax deductible since they are made with after-tax funds. However, all qualified Roth distributions are tax free!
Yes, many Solo 401(k) plans allow for Roth contributions. These are made with after-tax dollars, enabling tax-free withdrawals in retirement. Prior to 2024, profit sharing contributions must have been made with pretax funds. However, thanks to SECURE Act 2.0, employer contributions can now be Roth.
Yes! However, the total contribution limit applies to all 401(k) plans in the aggregate. Contributions made to one plan lessens the amount you can save for another.
Yes! 401(k) plans and IRAs have separate contribution limits. For both 2024 and 2025, you may contribute an additional $7,000 if you are under the age of 50, plus an additional $1,000 if you are age 50 or older. Just like 401(k) plans, those limits are across all IRAs in the aggregate.
Both Solos and SEPs are suitable for self-employed individuals, but key differences include:
- Solo 401(k) allows both employee and employer contributions, enabling higher contribution limits.
- Solo 401(k) plans may include Roth and loan options, unlike SEP IRAs.
- SEP IRAs are generally easier to set up and administer.
Bear in mind, if you hire non-owner, non-spouse employees, you cannot utilize the Solo 401(k) plan.
Yes, contributions that exceed the IRS limits are subject to a 6% excise tax unless corrected by removing the excess by the tax-filing deadline (including extensions).
