Solo 401k Contribution Calculator for 2024 & 2025

Employee Contribution Rules

As a self-employed individual, you can make employee deferrals up to the annual limit ($23,000 for 2024 and $23,500 for 2025). For 2024, if you're 50 or older, you can make an additional catch-up contribution of $7,500. For 2025, catch-up contributions vary by age:

• Ages 50-59: $7,500 additional catch-up
• Ages 60-63: $11,250 additional catch-up
• Ages 64+: $7,500 additional catch-up

Timing: Employee contributions must be made by December 31 of the tax year. For example, 2024 employee contributions must be completed by December 31, 2024.

Employer Contribution Rules

As the employer, you can also make profit-sharing contributions:

• Sole Proprietors/Single-Member LLCs: Up to 20% of your net self-employment income (net profit minus half of self-employment tax)
• Corporations: Up to 25% of W-2 compensation

Employer contributions are always pre-tax (Traditional) and cannot be made as Roth contributions.

Timing: Employer contributions can be made until your tax filing deadline, including extensions. This means you can potentially make employer contributions for 2024 as late as October 15, 2025, if you file an extension.

Total Contribution Limits

The combined employee and employer contributions cannot exceed the annual limit ($69,000 for 2024 and $69,500 for 2025).

With catch-up contributions, the total limits are:

• 2024: $76,500 (for age 50+)
• 2025:
  • Ages 50-59: $77,000
  • Ages 60-63: $80,750
  • Ages 64+: $77,000

Contribution Process

The process for making contributions varies based on your business structure:

• Sole Proprietors/Single-Member LLCs: Both employee and employer contributions are made directly to your Solo 401k provider. You'll need to specify which portion is employee deferral and which is employer contribution.
• S-Corporations: Employee deferrals must be made through formal payroll deductions from your W-2 wages. Employer contributions are made directly from the business to the Solo 401k plan as a business expense. Proper documentation is essential to distinguish between your salary and distributions.
• C-Corporations: Employee deferrals are typically made through payroll deductions throughout the year. Employer contributions are made directly from the business to the Solo 401k plan.

Most Solo 401k providers have specific forms to document your contributions properly for tax reporting purposes. S-Corporation owners should maintain detailed records of payroll deductions for employee contributions to support their tax filings.

Important Considerations

• If you have multiple employers or participate in another employer's 401k plan, the employee deferral limit applies across all plans combined
• Employer contributions are not affected by participation in other plans
• Contributions must be made by the tax filing deadline (including extensions)
• For sole proprietors, your contribution limit is based on your net earnings from self-employment
• For S-Corporation owners, only your W-2 wages (not distributions) count for employee deferrals
• S-Corporation owners must establish "reasonable compensation" for their W-2 wages to avoid IRS scrutiny. Talk to your accountant.
• S-Corporation employer contributions are limited to 25% of W-2 compensation, not including distributions
• If your business has a net loss for the year, you cannot make employer contributions
• You must establish your Solo 401k plan by December 31 of the tax year to make contributions for that year

Tax Advantages

Traditional contributions reduce your current taxable income, while Roth contributions allow for tax-free growth and withdrawals in retirement. Consider your current and expected future tax rates when deciding between Traditional and Roth contributions.

Sole Proprietor/Single-Member LLC Special Considerations

Sole Proprietors and Single-Member LLC owners face specific considerations when making Solo 401k contributions:

• Self-Employment Tax: Your contribution calculations are based on net earnings after deducting half of your self-employment tax.
• Contribution Basis: Your employee and employer contributions are calculated from the same income source (Schedule C net profit).
• Simplified Administration: No formal payroll system is required, making contribution processing more straightforward.
• Documentation: Keep detailed records of your business income and how contribution amounts were calculated.
• Tax Reporting: Employee contributions are reported on your personal tax return, while employer contributions are reported as a business expense on Schedule C.

S-Corporation Special Considerations

S-Corporation owners face unique considerations when making Solo 401k contributions:

• Reasonable Compensation: The IRS requires S-Corporation owners to pay themselves "reasonable compensation" as W-2 wages before taking distributions. This compensation must be comparable to what would be paid for similar services in your industry.
• Contribution Basis: Employee deferrals can only be made from W-2 wages, not from distributions or pass-through profits.
• Tax Advantages: S-Corporation owners can potentially reduce self-employment taxes by taking a portion of their income as distributions, but this strategy must be balanced with maintaining sufficient W-2 wages for retirement contributions.
• Documentation: Maintain clear documentation of your compensation structure and the business rationale for your salary level to support your position in case of an IRS audit.
• Payroll Requirements: Employee contributions must be made through formal payroll deductions, requiring proper payroll processing.

C-Corporation Special Considerations

C-Corporation owners should be aware of these specific considerations for Solo 401k contributions:

• Corporate Structure: As a C-Corporation owner-employee, your contributions are based solely on your W-2 wages from the corporation.
• Double Taxation: While C-Corporations face potential double taxation on profits, retirement contributions can help reduce corporate taxable income.
• Compensation Planning: Carefully structure your salary to optimize retirement contributions while managing corporate tax liability.
• Payroll Integration: Employee contributions must be processed through your corporate payroll system.
• Corporate Deduction: Employer contributions are deductible business expenses for the corporation, potentially reducing corporate tax liability.