How Solo 401k limits work in 2026
A Solo 401k (also called an individual or one-participant 401k) is for business owners with no employees other than a spouse. Because you’re both the employee and the employer, you can contribute in two ways:
- Employee deferrals: up to $24,500 in 2026, pre-tax or Roth, but no more than your earned income. This limit is per person, so deferrals at another job count against it.
- Employer profit-sharing: up to 20% of net self-employment earnings for sole proprietors, or 25% of W-2 salary for S-Corp owners.
- Combined cap: deferrals plus profit-sharing can’t exceed $72,000 per plan, not counting catch-ups.
- Catch-ups: an extra $8,000 from age 50, or $11,250 if you’re 60 to 63.
Why sole proprietors get 20%, not 25%
The law says 25% of compensation, but for the self-employed, “compensation” is net earnings after subtracting half of your self-employment tax and the contribution itself. Working that circular math out gives an effective 20% of net earnings after half the SE tax. That’s what this calculator uses.
Solo 401k vs. SEP-IRA
A SEP-IRA only allows the employer portion. A Solo 401k adds employee deferrals on top, so at low and moderate incomes it lets you save far more. On $60,000 of net profit, for example, the difference is more than $24,000 a year. At very high incomes both reach the same $72,000 cap. Solo 401ks also allow Roth contributions, and, unlike a SEP-IRA, they don’t interfere with backdoor Roth IRA contributions.
The trade-off is a little more paperwork. Once plan assets pass $250,000, you file a short annual Form 5500-EZ.
What this means for early retirement
For a freelancer chasing FIRE, a Solo 401k can be the single biggest lever: tens of thousands a year of tax-advantaged saving that a SEP or IRA can’t match. If you plan to retire early, read how to access retirement money before 59½, and use the full FIRE calculator (choose “1099” or “Business owner”) to see how it moves your FIRE date.
Common questions
Can I have a Solo 401k if I also have a 401k at my day job?
Yes. Your employee deferral limit of $24,500 is shared across all your 401ks, but the profit-sharing room in your Solo 401k is separate, so a side business can still add a lot.
Can my spouse contribute to my Solo 401k?
Yes, if your spouse earns income from the business. Each of you gets your own deferral and profit-sharing limits, which can roughly double what your household saves.
When do I need to open a Solo 401k?
To be safe, open it before December 31 if you want to make employee deferrals for that year. Profit-sharing contributions can usually be made until your tax filing deadline. Recent law changes added some flexibility for new sole-proprietor plans, so check with your plan provider.
Does the calculator include state taxes or the QBI deduction?
No. It calculates contribution limits, which depend only on your net earnings or W-2 salary. Use the full FIRE calculator for a complete tax picture.
Estimates for education only, not financial or tax advice. 2026 tax-year rules and limits; check the details with your plan provider or a tax professional.