Solo 401(k): How the Self-Employed Get the Biggest 401(k) of All
A solo 401(k) is a full 401(k) plan built for one self-employed person with no employees other than a spouse. For 2026 you can contribute up to $24,500 as employee deferrals, plus an employer profit-sharing contribution of up to 25% of compensation, for a combined $72,000. If you are 50 or older, catch-up contributions stack on top of that cap.
On this page
Some links on this page may earn us a commission at no cost to you. How we make money.
$72,000
Combined employee + employer cap · Employee deferral up to $24,500 · Employer contribution up to 25% of compensation · + $8,000 catch-up at 50+, or $11,250 at ages 60–63 (up to $83,250 total)
Source: IRS Notice 2025-67; IRC §§402(g), 415(c), 414(v)
Who qualifies for a solo 401(k)?
You qualify if you have self-employment income and no common-law employees other than your spouse. That is really the whole test. The IRS calls this a “one-participant 401(k)”, while brokerages market the identical product as a solo, individual, or self-employed 401(k). Different names, same plan.
Sole proprietors, single-member LLCs, partnerships, and S-corporation owners all qualify. It also works whether self-employment is your whole living or a side gig you run alongside a day job, which surprises a lot of people who assume they need to quit their job first. If you file a Schedule C for freelance work, you are probably eligible.
The no-employees condition is the line that matters. Independent contractors you hire do not count as employees, and part-time workers who fall below the plan’s eligibility thresholds may be excludable. Once a non-spouse employee does qualify for the plan, though, it stops being a solo plan. It becomes a regular 401(k), with nondiscrimination testing and full annual filing duties.
One rule change is worth knowing before you hire anyone. Under SECURE 2.0, long-term part-time employees who work 500 or more hours in consecutive years must eventually be allowed to defer, so a “just a few hours a week” helper can eventually pull you into the full 401(k) world. Plan for that possibility before the hire, not after.
How much can I contribute to a solo 401(k) in 2026?
Here is the feature that makes this plan so powerful. You wear two hats in your own business, and each hat gets to contribute separately.
- Employee hat: up to $24,500 for 2026. This is the same 402(g) elective deferral limit that every 401(k) participant in the country gets, and you can defer up to 100% of your compensation until you reach it. Add the $8,000 catch-up at age 50+, or $11,250 at ages 60–63.
- Employer hat: up to 25% of compensation. Your business makes a profit-sharing contribution on top of your deferrals. For an S-corp owner, that is 25% of your W-2 wages. For a sole proprietor or single-member LLC, the same rule works out to roughly 20% of your net self-employment income after you deduct half of your self-employment tax.
That 20% figure confuses almost everyone the first time they see it. The percentage is lower for a sole proprietor because your compensation and your contribution define each other, so the math has to solve for both at once. The IRS walks through this in its guide to calculating your own contribution and deduction, and it is the single step people most often get wrong.
The two hats together are capped at the 415(c) limit of $72,000 for 2026. Catch-up contributions sit on top of that cap rather than inside it, which means you can reach $80,000 at age 50 and up, or $83,250 at ages 60 through 63 (IRS Notice 2025-67). This double-barreled structure is why a solo 401(k) usually beats every other self-employed retirement plan at low and middle incomes. The $24,500 deferral is available from your very first dollar of profit, not just as a percentage of it.
| Employee deferral | $24,500 |
| Employer contribution (≈20% of net SE income after the SE-tax deduction) | ≈$22,300 |
| Total solo 401(k) contribution | ≈$46,800 |
Solo 401(k) contribution limit: run your own numbers
| Step | Your number | Example |
|---|---|---|
| 1. Net self-employment income (Schedule C net profit) | $_______ | $120,000 |
| 2. Subtract half of your self-employment tax | −$_______ | −$8,500 |
| 3. Net earned income (line 1 minus line 2) | $_______ | $111,500 |
| 4. Employer contribution (20% of line 3 for a sole proprietor) | $_______ | $22,300 |
| 5. Employee deferral (up to $24,500, or up to 100% of line 3 if that is smaller) | $_______ | $24,500 |
| 6. Total additions (line 4 plus line 5) | $_______ | $46,800 |
| 7. Cap check, line 6 cannot exceed $72,000 for 2026 | $_______ | Under the cap |
| 8. Catch-up on top if you are 50+ ($8,000) or 60–63 ($11,250) | +$_______ | +$8,000 at 50+ |
If you are an S-corporation owner, replace steps 1 through 4 with a simpler calculation. Your compensation is your W-2 wages from the business, and the employer contribution is a straight 25% of those wages. Either way, step 7 is the one to double-check, because the $72,000 total-additions cap for 2026 is a hard ceiling on lines 4 and 5 combined. Your own self-employment tax will differ from the example, so use your actual Schedule SE figure rather than the round number shown here.
Roth contributions in a solo 401(k)
Yes, you can make Roth contributions, as long as your plan document includes a Roth feature. Most major brokerage solo 401(k)s now do, but it is worth confirming before you open the account rather than discovering the gap in December.
Your $24,500 employee deferral can be pre-tax, Roth, or any mix of the two. The employer profit-sharing contribution has traditionally been pre-tax only, though SECURE 2.0 now permits plans to offer Roth employer contributions if they choose to. Adoption of that feature is still uneven, so check with your provider.
For a high earner who is locked out of direct Roth IRA contributions by the income limits, Roth solo 401(k) deferrals are one of the simplest ways to build tax-free retirement money. There is no income limit on Roth deferrals inside a workplace plan, and a solo 401(k) is a workplace plan where you happen to be the workplace.
Spousal contributions
A spouse who earns income from the business is the one employee who does not disqualify the plan. Better still, they get their own full set of limits, which effectively doubles the household’s shelter.
Both spouses maxing out means up to $144,000 into the plan for 2026 before any catch-ups, and up to $160,000 if both are 50 or older. That is more than most couples can save, but the room is there when a business has a strong year.
One condition keeps this honest. The spouse’s contributions are based on their own compensation from the business, so they need real earned income in the form of wages or self-employment earnings. Filing a joint tax return is not enough on its own.
Solo 401(k) vs. SEP IRA
If you are self-employed with no employees, this is usually the only comparison you need to make, and the solo 401(k) wins on almost every feature until you reach very high income. At the top end both plans run into the same $72,000 cap for 2026 and the difference disappears.
- Bigger contributions below the cap. A SEP is employer money only, using the same 25% (or ≈20% for a sole proprietor) formula, with no deferral component at all. At $120,000 of net income the solo 401(k) shelters roughly twice as much.
- Catch-ups. The solo 401(k) allows the $8,000 catch-up at 50+ and the $11,250 super catch-up at 60–63. A SEP IRA has no catch-up at any age, because catch-ups attach to deferrals and a SEP has none.
- Roth deferrals and loans. A solo 401(k) can offer both if the plan document allows. A SEP can never make loans, because SEP money lives in an IRA, and Roth SEP contributions remain rare in practice.
- Simplicity favors the SEP. A SEP has no plan-document elections, no deferral timing rules, and no Form 5500-EZ at any balance. If you plan to make a modest employer-only contribution and want zero administration, a SEP is a perfectly defensible choice.
The table below shows where the gap actually lands. These figures use the sole-proprietor math, so the employer column is about 20% of net earned income after the self-employment tax deduction, and the reader is assumed to be under 50.
| Net self-employment income | SEP IRA maximum | Solo 401(k) maximum | Extra room in the solo 401(k) |
|---|---|---|---|
| $50,000 | ≈$9,300 | ≈$33,800 | ≈$24,500 |
| $100,000 | ≈$18,600 | ≈$43,100 | ≈$24,500 |
| $120,000 | ≈$22,300 | ≈$46,800 | ≈$24,500 |
| High enough that 25% alone reaches the cap | $72,000 | $72,000 | $0 (both capped) |
Notice the pattern in the last column. Until you hit the $72,000 ceiling, the solo 401(k) advantage is almost exactly the deferral limit, because that is the one thing a SEP cannot do. If your net income is high enough that the employer formula alone fills the $72,000 cap, the two plans are tied on contributions and you should choose on features instead.
For the full comparison, including what changes once you have employees on the payroll, see SEP IRA vs. 401(k).
Setup and funding deadlines
The rules here loosened considerably under the SECURE Act, and the old advice about opening a plan by December 31 is out of date. You can now establish a solo 401(k) as late as your business tax-filing deadline, including extensions, for the prior year. Employer profit-sharing contributions can also be made up to that same deadline.
Employee deferrals are stricter. Your deferral election generally has to be in place by year-end, and S-corp owners must actually run deferrals through payroll during the year rather than writing a check afterward. This trips up owners who decide in March that they wish they had saved more.
SECURE 2.0 added a narrow accommodation for the first year. A sole proprietor adopting a brand-new plan may be able to make that initial-year deferral up to the individual filing deadline. The details are technical and the mechanics vary by provider, so confirm the timing with your provider or tax adviser before you count on a retroactive deferral.
IRS filing requirements
For most of the plan’s life, you file nothing at all. That changes once the plan grows past a specific number.
When total plan assets exceed $250,000 at the end of a plan year, you must file Form 5500-EZ every year after that. A final 5500-EZ is also required when you terminate the plan, no matter how small the balance is. It is a short information return and not a difficult one to complete.
Contributions themselves are reported on your business or personal return. A sole proprietor’s deduction for their own contributions, for example, goes on Schedule 1 of Form 1040. Your brokerage performs no nondiscrimination testing, because in a one-participant plan there is nobody to test you against.
Choosing a provider
Nearly every major brokerage offers a prototype solo 401(k) with no setup fee and no annual fee. You invest in the same funds and pay the same expense ratios you would in any retail account, so the investment side of the decision is usually a wash.
What varies is the plan document. When you compare providers, check three specific features. Does the plan support Roth deferrals, does it allow plan loans, and will it accept incoming rollovers from old 401(k)s or IRAs? Free prototypes often say no to one or more of these.
If you want less common features, such as after-tax contributions to run a mega backdoor Roth, you will likely need a paid custom plan document from a specialty provider rather than a free prototype. That usually costs a few hundred dollars a year, which is worth it only if you will actually use the feature.
Frequently asked questions
Can I have a solo 401(k) and a 401(k) at my day job?
Yes, and this combination is more common than people expect. Your employee deferrals across both plans share one $24,500 limit for 2026, because 402(g) is a per-person limit, not a per-plan one. Each unrelated employer does get its own $72,000 415(c) limit, though, so if your day job absorbs all of your deferrals, the solo plan can still take employer profit-sharing contributions from your side business.
What happens if I hire an employee?
Once a non-spouse employee meets the plan’s eligibility rules, the plan stops being a one-participant plan. You have to cover that employee, pass nondiscrimination testing or adopt a safe-harbor design, and file the full Form 5500 series instead of the short EZ version. None of that is impossible, but it costs money and attention. Talk to a plan provider before the hire rather than after it.
Can I take a loan from my solo 401(k)?
Only if your plan document allows loans, and many free brokerage prototypes do not. Where loans are offered, the normal 401(k) loan rules apply. You can borrow the lesser of $50,000 or 50% of your vested balance (IRC §72(p)). A SEP or any other IRA can never make a loan at all, which is one more reason the solo 401(k) is the more flexible structure.
Does the Roth catch-up mandate apply to the self-employed?
The 2026 mandate keys off prior-year FICA wages above $150,000. Self-employment earnings are not FICA wages, so a sole proprietor with no W-2 generally is not caught by it. S-corp owners are in a different position, because they pay themselves W-2 wages that do count toward the test. This is a genuinely gray area in practice, so confirm your situation with a tax adviser.
Do I need an EIN to open a solo 401(k)?
Yes, in practice you do. Providers require an employer identification number for the plan, and a sole proprietor should not use a Social Security number on plan paperwork. An EIN is free from the IRS online and is issued immediately, so this takes about ten minutes.
Related reading
- SEP IRA vs. 401(k): full comparison for business owners
- All 2026 401(k) contribution limits in one table
- How profit-sharing contributions work
Sources: IRS: One-participant 401(k) plans · IRS: calculating your own contribution and deduction · IRS Notice 2025-67 (2026 limits) · IRC §415