2019 Solo 401(k) Contribution Limits
The 2019 contribution limits for a Solo 401(k) retirement plan (also known as the self-employed 401(k) contribution limit) has increased from 2018 contributions. Depending on your age and earnings, you can contribute up to $56,000 if you're 50 and under. You can contribute $62,000 if you're 50 and older.
Solo 401(k) Contribution Limits - Two Part Solo 401(k)
Your Solo 401(k) Plan consists of two components. You can contribute money into your retirement account as an employer and employee. Therefore, you have two Solo 401(k) contributions.
As an employee of a self-employed business or small business with no full-time employees (other than an owner or a spouse), you have the option to make the Employee Contribution. This is also known as the Elective Deferral. For 2019, the Solo 401(k) maximum contribution limit for the elective deferral is 19,000 if you're 50 and under. This is an increase from the 2018 contribution of $18,500. Whereas, the elective deferral contribution if you're 50 and older is $25,000, up $500 from 2018. Employee deferral contributions can be made in pre-tax or Roth.
The Solo 401(k) Profit Sharing Contribution is also known as the Employer Contribution. For 2019, you can make a contribution of $37,000 whether you are under or over 50 years old. Unlike the employee deferral contribution, which is a dollar-for-dollar contribution, the solo 401(k) plan employer contribution is based on a percentage of the income.
If your business is a corporation or multi-member LLC, your maximum profit sharing contribution is up to or equal to 25% of your W-2 income or guaranteed payment amount in the case of a partnership.
If your business is a sole proprietor or single member LLC, your maximum profit sharing contribution is up to or equal to 20% of your schedule C income.
As a result, the maximum contribution for a Solo 401(k) plan if you're 50 and younger is $56,000. If you're 50 and older, you can make a maximum contribution of $62,000.
Because you have two contribution types, you can reach the maximum contribution amount in a Solo 401(k) retirement plan quicker than a SEP IRA.
Total Limit for Couples
Your spouse can participate in the Solo 401(k) Plan if he/she earns compensation from the business. He or she can make separate and equal contributions. This increases the annual contribution to $112,000 (under 50) or $124,000 (over 50) for 2019.
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