Can Therapists Open a Solo 401k?

Are you a therapist running your own practice and wondering if you can open a Solo 401k? If you earn self-employment income from your therapy services and don’t have any full-time employees, you’re likely eligible. A Solo 401k could offer much higher contribution limits than traditional retirement accounts — along with valuable tax advantages.

Whether you’re a licensed professional counselor (LPC), clinical psychologist, marriage and family therapist (MFT), or social worker operating independently, the Solo 401k is worth considering.

Who Qualifies for a Solo 401k?

The Solo 401k is designed specifically for self-employed individuals or business owners with no full-time employees, other than themselves or their spouse. For therapists, that typically means those working as sole proprietors, single-member LLCs, or even S corporations.

You don’t need to be incorporated or earn six figures to qualify. What matters is that you have eligible business income and meet the IRS rules for participation.

You may qualify if you:

✅ Provide therapy or counseling services under your own name or business

✅ Earn self-employment income from private clients, consulting, or telehealth work

✅ Have no full-time employees, aside from your spouse (if applicable)

You may not qualify if you:

❌ Employ full-time staff who meet IRS service thresholds (age 21, 500+ hours/year for three consecutive years)

❌ Only earn income as a W-2 employee and have no separate business income

📝 Note: Part-time help such as virtual receptionists, assistants, or billers won’t automatically disqualify you. The key factor is whether they meet the IRS definition of an eligible employee.

How Contributions Work for Therapists

One of the biggest draws of a Solo 401k is the ability to contribute in two roles — as both the employee and the employer. This dual contribution structure allows therapists to potentially set aside far more than they could with an IRA or SEP IRA.

Employee Contribution

As the “employee,” you can contribute up to $23,500 in 2025, based on your net earnings or W-2 wages (if you’re an S corp). If you’re age 50 or older, you can contribute an additional $7,500 in catch-up contributions, bringing the employee total to $31,000.

This portion is flexible. You can contribute any amount up to the limit, depending on how much you earn and how much you want to defer.

Employer Contribution

As the “employer,” your business can contribute up to:

Employer contributions are in addition to the employee deferrals — meaning even modest income can support substantial retirement savings.

Total Contribution Limit for 2025

Your total combined contributions (employee + employer) can’t exceed:

📝 Note: If you’re self-employed, your “net earnings” must be calculated after deducting business expenses and half of your self-employment tax. This reduces the base used for calculating the 20 percent employer contribution.

What If You Have a Full-Time Job?

You can still open a Solo 401k for your therapy income even if you work full-time elsewhere. But there are some key limitations.

Your employee deferral limit is a shared limit across all 401k plans you contribute to in the same year. That means if you’re already deferring a portion of your W-2 salary into a 401k through your employer, you’ll need to subtract that amount from what you can contribute to your Solo 401k as an employee.

But there’s good news: the employer side of the Solo 401k is not impacted by your day job’s 401k. You can still make employer contributions based on your self-employment income, even if you’ve maxed out deferrals at work.

Benefits of a Solo 401k for Therapists

Beyond high contribution limits, the Solo 401k offers several features that may appeal to therapists managing their own practices.

✅ Pre-Tax or Roth Options

Many providers allow you to choose between traditional (pre-tax) and Roth (after-tax) contributions — or even split between both.

✅ Tax Deductions

Employer contributions are generally tax-deductible as a business expense, which can lower your total taxable income.

✅ Loan Availability

Some Solo 401k plans include a loan feature, allowing you to borrow up to 50 percent of your account balance (max $50,000), which could provide short-term financial flexibility.

✅ Control and Flexibility

You get to choose your investment provider, manage your own funds, and adjust contributions annually based on your business cash flow.

📝 Important: Make sure to follow IRS rules to avoid prohibited transactions.

✅ No Annual Filing (Until You Reach $250,000)

You won’t need to file IRS Form 5500-EZ until your plan assets reach $250,000, which simplifies the early years of participation.

📌 Also Read: How to Add Your Spouse to Your Solo 401k Plan

Final Thoughts

Therapists who run their own practices often face unique financial challenges — but retirement saving doesn’t have to be one of them. If you qualify, a Solo 401k can offer significant contribution room, potential tax advantages, and more control over your financial future.

📌 Looking for other options or want to compare plans? Check out:

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