If you earn income from hosting on Airbnb and run your rental operation as a business, you might be wondering if there’s a way to save more for retirement while potentially lowering your taxes. One option worth considering is a Solo 401k.
This guide breaks down how Airbnb hosts may qualify, what the plan offers, and the key details you need to know before opening one.
Looking to Open a Solo 401k Plan?
Get started today with just a few clicks – The Carry Solo 401k Plan is a featured-packed self-directed account that lets you invest in both traditional and alternative assets, take out a loan, or do a Mega Backdoor Roth conversion with a few clicks.
GET STARTEDSolo 401(k) eligibility and contribution limits depend on IRS rules. Carry does not provide tax advice, consult a tax advisor. Carry Advisors LLC, an SEC-registered investment adviser, provides investment advisory services for discretionary and non-discretionary accounts (e.g., Solo 401(k), IRA, taxable brokerage accounts). Bank and trust accounts are not advised by Carry Advisors. Brokerage accounts are introduced by Global Carry LLC and carried by DriveWealth LLC, both members FINRA/SIPC. Advisory fees may apply and additional disclosures are described in our Form ADV and CRS.
Do Airbnb Hosts Qualify for a Solo 401k?
Generally, yes. If you’re self-employed and manage your Airbnb business without full-time employees (other than your spouse), you’re likely eligible.
A Solo 401k, also known as a one-participant 401k, is designed specifically for self-employed individuals with no employees. That makes it a potential fit for Airbnb hosts who operate solo, whether you run your rental through a sole proprietorship, LLC, partnership, or S corporation.
📝 Note: If you hire a full-time employee who works 1,000 hours or more in a year, your plan must cover them. At that point, your plan would no longer qualify as a Solo 401k.
Basic Requirements for Airbnb Hosts
To open a Solo 401k, you’ll need to meet the following:
✅ Earn Self-Employment Income: Your income must come from self-employment activities tied to your Airbnb business. This could include nightly stays, cleaning fees, or additional services. If you’re a sole proprietor, this income is typically reported on Schedule C. If you operate through an S corporation, it would come from the W-2 wages you pay yourself.
✅ No Full-Time Employees: You must not have any full-time employees other than your spouse.
✅ Eligible Business Type: Your business structure can be a sole proprietorship, LLC, partnership, or corporation as long as it complies with the no-employee rule.
📌 Also Read: Important Forms for Solo 401k Owners
Why Some Airbnb Hosts Consider a Solo 401k
Solo 401k plans could provide several benefits, especially for hosts looking to increase retirement savings while reducing taxable income.
1) Higher Contribution Potential
Because you act as both the employee and the employer, you can contribute in both capacities—potentially allowing for larger contributions than other retirement plans.
📝 Note: Contribution limits are based on net income after deducting half of your self-employment tax and any plan contributions.
2) Traditional and Roth Options Available
Solo 401k plans typically let you to choose between:
- Traditional Solo 401k: Contributions are made before taxes, which may reduce your taxable income for the year. Withdrawals are taxed as ordinary income in retirement.
- Roth Solo 401k: Contributions are made after taxes. Qualified withdrawals during retirement are generally tax-free.
📝 Note: Choosing between the two depends on your current income and expected tax bracket in retirement.
3) Flexible Investment Choices
Depending on your plan provider, a Solo 401k could allow you to invest in almost any asset type — including mutual funds, ETFs, stocks, and bonds. In some cases, alternative assets like real estate may be allowed.
📝 Reminder: Be sure to follow IRS rules to avoid prohibited transactions.
4) Your Spouse Can Join the Plan
If your spouse helps with the Airbnb business and earns income from it, they may be able to participate in the same Solo 401k plan.
- Both of you must earn income from the business
- Each person makes contributions based on their own earnings
- The plan treats each of you as separate participants
This setup could help you increase your combined household retirement contributions, though individual limits still apply.
📝 Note: Once the plan’s assets exceed $250,000, an annual IRS filing (Form 5500-EZ) is generally required.
📌 Also Read: How to Add Your Spouse to Your Solo 401k Plan
2025 Solo 401k Contribution Limits
Here’s what the IRS has set for 2025:
✅ Employee Contributions: Up to $23,500
✅ Catch-Up (Age 50 or Older): Additional $7,500, for a total of $31,000
✅ Employer Contributions: Up to 25 percent of your compensation
✅ Combined Contribution Limit: $70,000 total, or $77,500 with catch-up contributions
📝 Keep in Mind: The income needed to reach the maximum contribution limit depends on how your business is structured. For example:
- Sole proprietors calculate contributions based on net income after accounting for self-employment tax and contribution deductions.
- S corporation owners base it on W-2 wages.
📌 Also Read: What Are The Different Types Of Business Entities?
Is a Solo 401k a Good Fit for Airbnb Hosts?
A Solo 401k could be worth exploring if you’re self-employed through Airbnb and want to potentially set aside meaningful dollars for retirement. The plan typically provides a higher contribution ceiling compared to other options, along with flexibility in how contributions are made and how funds are invested.
That said, managing a Solo 401k comes with responsibilities like staying compliant with IRS rules and tracking filings once your account balance grows.
Whether or not it’s the right fit depends on how your business is set up and what your long-term financial goals look like. It’s generally recommended to speak with a qualified tax or financial advisor to make sure you’re choosing the right strategy for your situation.
📌 Also Read: How to Open a 401k Without An Employer
Disclaimer:
The Carry Learning Center is operated by The Vibes Company Inc. (“Vibes”) and contains generalized educational content about personal finance topics. While Vibes provides educational content and technology services, all investment advisory services discussed on this website are provided exclusively through its wholly-owned subsidiary, Carry Advisors LLC (“Carry Advisors”), an SEC registered investment adviser. The information contained on the Carry Learning Center should not be construed as personalized investment advice and should not be considered as a solicitation to buy or sell any security or engage in a particular investment, accounting, tax or legal strategy. Vibes is not providing tax, legal, accounting, or investment advice. You should consult with qualified tax, legal, accounting, and investment professionals regarding your specific situation.
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