A comprehensive guide to Solo 401(k) plans, eligibility, contributions, and key considerations for
self-employed professionals.
A Solo 401(k), also known as an Individual 401(k) or One-Participant 401(k), is a retirement savings plan designed specifically for self-employed individuals and business owners with no full-time employees other than a spouse.
This plan type allows you to make contributions as both the employee and the employer, potentially enabling higher annual contribution limits compared to other retirement plan options.
Solo 401(k) plans function similarly to traditional employer-sponsored 401(k) plans but are streamlined for owner-only businesses, offering flexibility in contribution strategies and investment choices.
Updated for the 2026 tax year.
The IRS periodically updates contribution limits for retirement plans. Below are the key limits applicable for the 2026 tax year.
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Total contributions cannot exceed your earned income from the business.
If your business is unincorporated, contributions are based on net earnings minus half of your self-employment tax and the deduction for contributions.
You must be self-employed or own a business
You cannot have any full-time employees (except a spouse)
Part-time or seasonal employees (under 1,000 hours/year) generally don't affect eligibility
You can have other employment with W-2 income, but contribution coordination is required
Solo 401(k) plans work with various business entities including sole proprietorships, LLCs, S corporations, C
corporations, and partnerships where all partners are owners with no common-law employees.
As the employee, you can contribute up to $23,000 for 2024 ($30,500 if age 50 or older with catch-up
contributions). These are elective deferrals from your compensation.
As the employer, you can make profit-sharing contributions up to 25% of compensation (for S-corps and C-
corps) or 20% of net self-employment income (for sole proprietorships and LLCs).
Total contributions from both employee and employer sources cannot exceed $69,000 for 2024 ($76,500
with catch-up contributions for those 50+).
Contribution limits are subject to annual adjustments by the IRS. Actual contribution amounts depend on your
specific income, business structure, and tax situation. Consult with a tax professional for personalized guidance.
Contributions reduce current taxable income
Tax-deferred growth
Distributions taxed as ordinary income
Required minimum distributions (RMDs) apply
Contributions made with after-tax dollars
Tax-free growth potential
Qualified distributions are tax-free
No RMDs during owner's lifetime (Roth 401k RMD rules)
Many Solo 401(k) plans allow you to split contributions between traditional pre-tax and Roth after-tax, giving
you flexibility to implement a tax diversification strategy. The right choice depends on your current tax
bracket, expected future tax rates, and overall financial planning goals.
If your Solo 401(k) plan document allows it, you may be able to borrow from your plan balance. This feature provides potential access to your retirement funds while you're still working.
Maximum loan amount: Lesser of $50,000 or 50% of vested account balance
Repayment period: Generally 5 years (longer for primary residence purchase)
Interest: Must pay reasonable interest rate to your plan
Repayments: Must be made at least quarterly
Participant loans can be a valuable feature, but they come with compliance requirements and potential risks. Defaulting on a loan may result in taxes and penalties. Always consider alternatives and understand the implications before borrowing from retirement funds.
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Once your plan assets exceed $250,000, you'll need to file Form 5500-EZ annually with
the IRS. Plans with assets below this threshold are generally exempt from filing requirements.
Your Solo 401(k) must have a written plan document that outlines plan terms, contribution types, distribution
rules, and other provisions. This document must be maintained and updated as regulations change.
Employee deferrals must be made by December 31 of the tax year. Employer profit-sharing contributions
can be made up until your business tax return deadline (including extensions).
Solo 401(k) plans involve ongoing compliance obligations. We strongly recommend working with qualified tax and
financial professionals to ensure your plan is properly administered and maintained in accordance with IRS regulations.
Schedule a consultation to discuss your Solo 401(k) questions and explore whether this retirement plan structure is right for you.
Disclaimer: This website provides educational information only and does not constitute tax, legal, or investment advice. Please consult with qualified professionals regarding your specific situation. Solo 401(k) plans may not be suitable for all individuals.
