Work out the maximum 2025 contribution to a solo 401(k) from your self-employment profit, age and deferral percentage.
| Scenario | Employee Deferral | Catch-Up | Employer (25%) | Total Contribution |
|---|---|---|---|---|
| $60,000 profit / age 40 / defer 100% | $23,500 | $0 | $13,940 | $37,440 |
| $100,000 profit / age 45 / defer 50% | $23,500 | $0 | $23,234 | $46,734 |
| $200,000 profit / age 55 / defer 100% | $23,500 | $7,500 | $46,468 | $77,468 |
| $300,000 profit / age 62 / defer 100% | $23,500 | $11,250 | $69,701 | $81,250 |
Each row uses the 2025 limits: a $23,500 employee deferral, $7,500 catch-up at 50+ ($11,250 at 60–63), a $70,000 total defined-contribution limit, and an employer profit-sharing maximum of 25% of net self-employment earnings — where net earnings are profit minus half of the 15.3% self-employment tax. The employee deferral and employer contribution together cannot exceed the total limit.
| Component | 2025 Limit |
|---|---|
| Employee elective deferral | $23,500 |
| Catch-up (age 50–59, 64+) | $7,500 |
| Super catch-up (age 60–63) | $11,250 |
| Total defined-contribution limit | $70,000 |
| Total limit including catch-up | $77,500 |
| Compensation cap for % calc | $350,000 |
A SEP IRA only allows the employer contribution — 25% of net earnings, up to $70,000. A solo 401(k) adds the $23,500 employee deferral on top, so at the same profit you can shelter far more. At $200,000 of profit, a SEP allows about $37,000 while a solo 401(k) reaches the full $70,000.
A solo 401(k), also called an individual 401(k) or one-participant 401(k), is a retirement plan for a business owner with no employees other than a spouse. It combines an employee deferral with an employer profit-sharing contribution in a single plan, which is why it shelters more income at the same profit level than a SEP IRA, SIMPLE IRA or traditional IRA.
As the employee you defer up to $23,500 of compensation (plus catch-up if 50 or older). As the employer — the same person wearing a different hat — you contribute up to 25% of net self-employment earnings. Because these are separate buckets, a profitable sole proprietor can reach the $70,000 combined limit with far less profit than a SEP IRA would require.
Establish the plan by December 31 to make employee deferrals for that year. Employer profit-sharing contributions can be made up to the tax-filing deadline including extensions, so a sole proprietor has until the extended October due date to fund the employer half. The employer contribution requires a plan document and, once plan assets exceed $250,000, an annual Form 5500-EZ.
Traditional deferrals cut taxable income now and are taxed on withdrawal. Roth deferrals are taxed now and grow tax-free. When income is unusually low, Roth is attractive; when you are in a high bracket, the traditional deduction usually wins. A high-balance solo 401(k) also permits a Roth conversion later in a low-income year.
⚠️ Important: Contribution limits, catch-up amounts and the compensation cap change annually and are indexed to inflation. This calculator applies 2025 limits to a simplified model of net self-employment earnings. Confirm current figures with IRS Publication 560 or a tax professional before funding.