Solo 401(k): Two Ways to Contribute, One Combined Limit
A Solo 401(k) is one of the most powerful retirement accounts available to self-employed workers with no full-time employees, because you can contribute in two roles at once. As the "employee," you can defer up to $23,500 of your own income in 2025 (plus a $7,500 catch-up if you're 50 or older, or a larger $11,250 "super catch-up" if you're 60-63). As the "employer," you can also add a profit-sharing contribution of up to 25% of your net self-employment income. Both pieces are tax-deductible now, and the combined total is capped at $70,000 for 2025 (higher with catch-up contributions). Because the deduction reduces your taxable income directly, the same dollar contribution saves more for someone in a higher tax bracket.
| Role | 2025 Limit |
|---|---|
| Employee deferral | $23,500 (+$7,500 or $11,250 catch-up) |
| Employer profit-sharing | 25% of net self-employment income |
| Combined total | $70,000 (higher with catch-up) |
This is a simplified federal-only estimate that doesn't account for state income tax or the exact IRS formula for self-employed compensation (which factors in half of your self-employment tax). You'll need to open a Solo 401(k) through a brokerage or plan provider — it isn't set up automatically. Confirm the current-year IRS limits and consult a tax professional before contributing.
Frequently Asked Questions
$23,500 as employee (plus catch-up if 50+) and up to 25% of income as employer, combined capped at $70,000 (higher with catch-up).
Your total deductible contribution is multiplied by your marginal federal tax rate to estimate the reduction in taxes owed.
Yes, you'll need to open one through a brokerage that offers Solo 401(k) plans, and you can't have full-time employees other than a spouse.
※ Federal estimate only. IRS limits change most years — verify the current cap and consult a tax professional.