What Is the Contribution Limit for a Solo 401(k) Plan?

When you have a Solo 401(k), you are contributing as both an employee to the plan and the employer”as well, since you are a self-employed business owner. For the employee portion, you can reserve the same $23,000 that participants of a large, employer-sponsored plan are allowed to save.

As an employer, you are allowed to contribute:

• Up to 25% of gross income as a profit-sharing contribution IF your business is a corporation.
• Up to 20% of net income IF your business is a sole proprietorship or partnership like an LLC.
• The total amount of employer/employee contributions cannot exceed $69,000 in 2024.

Net self-employment income is calculated by subtracting your business income minus half your self-employment tax. Since the contributions are made with pre-tax dollars, your taxable income is effectively lowered, which helps cut your tax bill. The total maximum you can contribute as an employer is $46,000 in 2024 no matter your age.

Catch-up contributions are the same $7,500 across 401(k)s. You can make these contributions as long as you turn 50 by December 31, 2024. If your spouse works for the business and is over 50, that’s another $7,500 you can contribute toward the plan.

To be eligible for a Solo 401(k), you must not have any full-time, regular employees, but the one exception to this rule is a spouse. Your spouse may participate in the plan and contribute to the same limits you do. However, if your spouse participates in another 401(k) plan, their contributions may be limited.

Some business owners set up Solo 401(k)s for their side jobs, but also participate in employer-sponsored 401(k)s. Keep in mind the upper limits are not JUST for the Solo 401(k), but for ALL 401(k) plans you contribute to.

Ubiquity has been a provider of small business and Solo 401(k) plans since 1999. For a low monthly fee, we’ll monitor your contributions, ensure you don’t exceed the maximum, and answer any questions you may have about investment options or other issues related to your retirement savings. Once your account reaches $250,000, you’ll need to fill out Form 5500 with the IRS – another task we handle on your behalf.

Start saving today with Ubiquity and take advantage of industry-low, flat monthly rates, and no additional add-on fees!