Solo 401(k) Contribution Calculator (2026)

The 2026 numbers

For 2026 the employee deferral limit is $24,500. Catch-up contributions add $8,000 from age 50, and ages 60 to 63 get an enhanced catch-up of $11,250 instead. Total annual additions — your deferral plus the employer share — are capped at $72,000, or $80,000 with catch-up and up to $83,250 in the 60-to-63 band. Compensation counted for any of this stops at $360,000.

The reason a Solo 401(k) is so effective for the self-employed is that you occupy both sides of the arrangement. You defer as the employee and contribute again as the employer, which is why the ceiling is several times what a workplace 401(k) alone allows.

The 25% that is really 20%

This is the error that matters, and it is everywhere.

The employer contribution is described in the regulations as up to 25% of compensation, and for an S-corporation owner taking a W-2 that is exactly right — 25% of the wages, because the wages are not themselves reduced by the contribution.

For a sole proprietor it is not. Your compensation for plan purposes is net earnings from self-employment after deducting the contribution — so the contribution is a percentage of a number it has already changed. Solving that circularity gives 0.25 ÷ 1.25 = 0.20, and the real figure is 20% of net earnings. IRS Publication 560 handles this with a rate table for precisely this reason.

A calculator that applies 25% to a sole proprietor's net earnings overstates the employer share by a quarter. That is not a rounding difference — it produces an excess contribution, which has to be corrected and carries a 6% penalty for every year it stays in the account uncorrected. It is worth checking any figure you have been given against this one.

There is a second, smaller step people miss underneath it. The base is not your Schedule C profit; it is that profit minus the deductible half of your self-employment tax. On $120,000 of profit that deduction is around $8,500, so the base is closer to $111,500 — and 20% of it, not 25% of $120,000. The two errors compound in the same direction.

The deferral limit is per person, not per plan

The second trap catches people who freelance alongside a job, which is most people starting out.

The $24,500 employee deferral limit is yours, not your plan's. If you defer $18,000 into an employer's 401(k) during the year, you have $6,500 left for your Solo 401(k) — not a fresh $24,500. The limit sits under §402(g) and follows the individual across every plan they participate in.

The employer contribution is different: it is per plan and per employer, so your own business can make its full 20% or 25% contribution regardless of what your day job's plan did. This asymmetry is genuinely useful, and it is the reason a side business with modest profit can still shelter a meaningful amount even when the employee limit is already used up elsewhere.

Exceeding the deferral limit across two plans is your responsibility to spot, not either employer's — neither can see the other. The correction has to happen by 15 April or the excess is taxed twice, once when contributed and again when distributed.

The Roth catch-up rule that starts in 2026

SECURE 2.0 requires catch-up contributions to be made as Roth — after tax — for higher earners, and after a delay that requirement takes effect in 2026. The test is whether your prior-year Social Security wages from the employer sponsoring the plan exceeded $150,000, measured on Box 3 of your 2025 Form W-2.

The detail that matters for this audience: self-employment income is not W-2 wages. A sole proprietor with no payroll has no Box 3 figure at all, so the test cannot be met and the pre-tax choice for catch-up contributions survives. The final regulations acknowledge the resulting disparity for partners and the self-employed, and allow plans to apply the restriction to them voluntarily — permissive, not mandatory. So check your plan document rather than assuming either way.

If you run an S-corporation and paid yourself more than $150,000 in 2025, the rule does apply to you, and your catch-up must be Roth from this year. That is not necessarily bad — Roth money grows and comes out tax free — but it removes a deduction you may have been counting on, and it is worth knowing before you plan around it.

Why the S-corporation version can be worse

There is a trade-off here that the payroll-tax arithmetic hides.

As an S-corporation owner, only your W-2 wages count as compensation for the plan. Distributions do not. So the low salary that makes the S-corp election attractive on payroll tax simultaneously caps how much you can put into retirement — and at 25% of a small salary, that ceiling can be well below what the same profit would have supported as a sole proprietor at 20% of nearly all of it.

Run both cases above with the same underlying profit. For someone prioritising retirement saving over immediate tax, the answer is sometimes to keep it simple, and it is almost always to take a higher salary than the payroll-tax calculation alone would suggest.

Deadlines and the practical bits

The plan has to exist before you can defer into it. Since SECURE 2.0 a sole proprietor can adopt a plan up to the tax filing deadline and still make employee deferrals for that year, which was previously impossible — but do not rely on it if you can set the plan up in good time, because the paperwork and the deferral election have their own requirements. Employer contributions can be made up to the filing deadline including extensions.

Once the balance passes $250,000 you must file Form 5500-EZ annually. It is a short form, but missing it carries penalties out of all proportion to the effort. And a Solo 401(k) only stays "solo" while you have no employees other than a spouse — taking on staff generally ends it and forces a move to a different plan.

If you are still deciding between plan types, our SEP-IRA versus Solo 401(k) comparison shows why the employee deferral makes the Solo win so decisively at modest profits, and the ACA subsidy calculator covers a reason to contribute that has nothing to do with retirement — a deductible contribution lowers the income your health insurance credit is measured against.

Frequently asked questions