Can Electricians Open a Solo 401k?

Are you an electrician running your own business and wondering if a Solo 401k is an option? If you operate independently and don’t have full-time employees, this retirement plan could be a fit. 

A Solo 401k allows self-employed professionals — including skilled tradespeople like electricians — to make large, tax-advantaged contributions to save for retirement.

Whether you handle residential wiring jobs, commercial contracts, or on-call emergency work, your self-employment income may qualify you for a Solo 401k.

📌 Also Read: What Is A Solo 401k? Rules, Eligibility, and FAQ for 2024 & 2025

Do Self-Employed Electricians Qualify?

Solo 401ks are designed for business owners who work independently without a full-time staff. That includes electricians who operate as sole proprietors, LLC owners, or S corp operators managing their own projects.

You don’t need to be incorporated to qualify. The key requirement is that you earn self-employment income and don’t have employees who meet IRS eligibility thresholds.

You likely qualify if you:

✅ Run your own electrical services business with no full-time workers

✅ Operate as a licensed contractor or subcontractor

✅ Report income through a Schedule C, LLC, or S corp structure

✅ Work alone or only with a spouse

You may not qualify if you:

❌ Have employees age 21+ who work over 500 hours per year for three consecutive years

❌ Only receive W-2 income from another employer and have no separate business activity

Note that hiring part-time help, apprentices, or seasonal assistants won’t automatically disqualify you. It depends on how many hours they work and how long they’ve worked for you.

Contribution Rules for Electricians

The Solo 401k stands out because you can contribute as both the employee and the employer. This dual structure allows for higher potential savings compared to an IRA or SEP IRA.

As the Employee

In 2025, you can contribute up to $23,500 in employee deferrals. If you’re 50 or older, you’re allowed an additional $7,500 in catch-up contributions, raising the total to $31,000.

These contributions can be made on a pre-tax basis (to reduce your taxable income now) or as Roth (after-tax), depending on the plan provider.

As the Employer

Your business can also contribute:

This employer portion is tax-deductible and gives you flexibility based on how much profit your business earns each year.

Total Contribution Limit for 2025

When combining both roles:

📝 Note: If you’re self-employed, you’ll need to calculate your “net earnings” after subtracting business expenses and half of your self-employment tax. This figure is used to determine how much you can contribute as the employer.

📌 Also Read: Important Forms for Solo 401k Owners

Can You Still Contribute If You Have a Job?

Yes. If you work a regular job as a W-2 employee and run your own electrical business on the side, you’re still eligible to open a Solo 401k — but with limits.

The employee deferral limit of $23,500 (or $31,000 with catch-up) is shared across all 401k plans you contribute to during the year. If you’re already contributing through a job-based plan, you’ll need to subtract that amount from what you can contribute to your Solo 401k.

However, the employer portion of the Solo 401k remains separate. You can still contribute up to 20% or 25% of your self-employment income from your electrical business, regardless of what you contribute at your day job.

Why Electricians Might Benefit From a Solo 401k

Electricians often work project to project, and some years may bring in more revenue than others. The Solo 401k offers the flexibility to save more in high-income years and scale back in leaner times — all while providing major tax perks.

✅ Larger Contribution Potential

You can contribute much more than a traditional IRA allows, especially in profitable years.

✅ Tax Savings

Pre-tax contributions can reduce your current taxable income, while employer contributions are deductible as a business expense.

✅ Roth Flexibility

If your plan allows Roth contributions, you can choose to pay taxes now in exchange for tax-free withdrawals later.

✅ Loan Option

Many Solo 401k providers let you borrow from your account — up to $50,000 or 50% of the balance — for short-term needs.

✅ Self-Managed Investments

You choose where to invest: index funds, mutual funds, and in some cases, even real estate or alternative assets.

✅ No Annual Filing Under $250,000

You won’t need to file IRS Form 5500-EZ until your plan balance exceeds $250,000.

Final Thoughts

For self-employed electricians, a Solo 401k offers more than just retirement savings. It gives you flexibility, control, and tax-smart strategies tailored to your business. Whether you’re wiring a new construction site or running emergency jobs on weekends, this account could be a valuable tool in building a strong financial future.

📌 Want to learn how other professionals are using Solo 401ks? Read these articles to compare your options:

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