Solo 401(k) Contribution Calculator 2025 – Employer + Employee Limits
Estimate 2025 Solo 401(k) contributions as both employee and employer. Model net earnings, catch‑up, and Roth vs Traditional options.
Solo 401(k) Contribution Calculator 2025 – Employer + Employee Limits
Introduction
Self‑employed? A Solo 401(k) allows both employee deferrals and employer profit‑sharing. This guide estimates your 2025 limits, including catch‑up and Roth options.
Inputs
- Net self‑employment income (after deductible half SE tax)
- Age (for catch‑up eligibility)
- Contribution type (Traditional/Roth)
2025 Limits (Illustrative)
- Employee deferral: up to IRS annual limit
- Employer profit‑sharing: up to a percentage of net earnings
- Combined limit capped per IRS rules
Examples
- $120k net income, age <50: employee max + employer share within combined cap
- $200k net, age 50+: add catch‑up; evaluate tax benefit vs cash‑flow
Tips
- Coordinate with other plans if you have W‑2 employment
- Consider Roth vs Traditional split for flexibility
- Revisit contributions after quarterly estimates
Related Tools
- 401(k) Contribution Calculator 2025: /calculator/retirement
- Tax Bracket Calculator 2025: /calculator
- Take‑Home Pay Calculator 2025: /calculator
CTA: Max Your Solo 401(k)
Enter net income and age to see how much you can contribute as employee and employer in 2025.
Solo 401(k) Mechanics (Deep Dive)
A Solo 401(k) (a.k.a. Individual 401(k)) lets self‑employed individuals contribute in two roles:
- Employee elective deferrals (Traditional or Roth): up to the annual IRS limit (illustrative), reduced by deferrals to other employer plans
- Employer profit‑sharing (Traditional only): a percentage of net earnings from self‑employment, subject to IRS calculations and combined plan limits
Combined contributions cannot exceed the overall annual cap. Catch‑up contributions for age 50+ increase the allowable total.
Calculating Net Earnings and Employer Share (Sole Prop/Single‑Member LLC)
- Net earnings ≈ Schedule C net profit minus the deductible half of self‑employment (SE) tax
- Employer contribution rate: often described as 20% of net earnings for sole proprietors (the 25% figure commonly cited applies to W‑2 wages in a corporation)
- Exact math requires computing SE tax first, then applying the contribution percentage
Consult IRS publications or a CPA for your entity type (sole prop vs S‑Corp) as the formula differs.
Examples (Illustrative)
Example A: $120,000 Net, Age 45
- Employee deferral: up to annual limit (reduced by any W‑2 deferrals)
- Employer share: ~20% of net earnings (after SE tax deduction), capped by combined limit
- Combined must not exceed IRS cap for 2025
Example B: $200,000 Net, Age 52 (Catch‑Up)
- Employee deferral: up to annual limit + catch‑up
- Employer share: 20% of adjusted net, respecting combined cap
- Strategy: fill employer share after securing employee max
Roth vs Traditional in a Solo 401(k)
- Employee deferrals can be Traditional or Roth (plan permitting)
- Employer profit‑sharing must be Traditional (pre‑tax)
- Consider current vs future tax rates; many split contributions for flexibility
Plan Setup, Deadlines, and Administration
- Establish plan by required deadline (often year‑end) to make employee deferrals; employer contributions may be made up to filing deadlines (extensions may apply)
- Keep plan documents updated; file Form 5500‑EZ when assets exceed thresholds
- Track contributions across multiple plans to avoid exceeding IRS limits
Optimization Playbook
- Pair Solo 401(k) with HSA and backdoor Roth for tax diversification
- If you also have W‑2 job with 401(k), coordinate employee deferral limits across both
- Consider S‑Corp salary vs distribution planning; employer contribution is based on W‑2 wages for S‑Corp owners
- Reinvest tax savings; automate contributions monthly to smooth cash flow
Mistakes to Avoid
- Overcontributing across multiple plans in the same year
- Missing plan establishment deadlines for employee deferrals
- Miscalculating employer percentage (sole prop vs S‑Corp rules differ)
- Forgetting Form 5500‑EZ when assets exceed the filing threshold
Frequently Asked Questions
Q: Can I do a Roth employer contribution?
A: Typically no; profit‑sharing is pre‑tax Traditional. Some plans support Roth employer nonelective only under specific designs—verify with your provider.
Q: How do my W‑2 deferrals affect Solo 401(k)?
A: The employee deferral limit is a combined cap across all 401(k) plans you participate in.
Q: Can I still do backdoor Roth?
A: Yes. A Solo 401(k) can help avoid pro‑rata issues by rolling pre‑tax IRA funds into the Solo 401(k) before a backdoor Roth.
Action Checklist
- Compute net earnings and SE tax estimate
- Decide employee deferral (Traditional/Roth) and target
- Add employer contribution within combined limits
- Establish/confirm plan documents and deadlines
- Track contributions and file required forms
Worked Walkthrough (Illustrative Numbers)
Assume: Sole proprietor with $150,000 Schedule C net profit, age 48, no other plans.
- Estimate SE tax and deductible half; reduce net earnings accordingly
- Employee deferral: up to annual limit (subject to combined deferrals across plans)
- Employer share: ~20% of adjusted net earnings
- Ensure total ≤ combined IRS cap
- Decide Traditional vs Roth for employee portion; employer is Traditional
Result: A large, tax‑efficient contribution that lowers current taxes and accelerates retirement savings.
Entity Differences (S‑Corp vs Sole Prop)
- S‑Corp owners typically pay themselves W‑2 wages; the employer contribution is a percentage of W‑2 wages (often cited as 25%)
- For sole props, the 20% rule applies to adjusted net earnings; don’t mix the two formulas
- Your CPA can help optimize salary/distribution mix for S‑Corps
Resources
- IRS Publication on Retirement Plans for Small Business
- Form 5500‑EZ instructions
- Major Solo 401(k) providers’ plan document checklists
Cash‑Flow Planning and Implementation Tips
- Monthly auto‑contributions: Smooths cash needs instead of lump‑sum at year‑end
- Quarterly true‑ups: After estimating net earnings/SE tax each quarter, revise contribution targets
- Emergency reserve: Maintain 3–6 months expenses outside the plan; avoid hardship withdrawals and penalties
- Tax estimates: Update your quarterly estimated tax vouchers to reflect lower taxable income from contributions
Provider Feature Checklist (Compare Before Opening)
- Roth deferral support, in‑plan Roth conversion availability
- After‑tax sub‑account (for potential mega‑backdoor‑style designs when permissible)
- Loans permitted? If yes, understand interest/re‑amortization rules
- Brokerage window and investment menu (index funds, transaction costs)
- Document fees and 5500‑EZ support
Illustrated Tax Coordination (Hypothetical)
Assume $180,000 net earnings, age 50 (catch‑up eligible):
- Employee deferral: up to annual limit + catch‑up (Roth or Traditional)
- Employer share: ~20% of adjusted net earnings
- Total ≤ combined cap
- If high current bracket: emphasize Traditional; if expecting higher future bracket: emphasize Roth employee deferrals
- Use HSA (if eligible) to further reduce MAGI
This approach can reduce current‑year taxes materially while building tax‑diversified retirement buckets.