How Much Can I Contribute to a Solo 401(k) in 2026?

The Solo 401(k) -- also known as the Individual 401(k) or one-participant 401(k) -- is one of the most flexible and generous retirement plans available to self-employed individuals with no full-time employees. For 2026, the combined contribution limit allows eligible participants to contribute a substantial amount of their self-employment income on a tax-deferred or Roth basis, making it an essential tool for reducing taxable income.

2026 Contribution Limits

The Solo 401(k) has two components -- employee deferrals and employer profit-sharing contributions -- each governed by separate IRC sections with distinct limits.

The employee deferral limit for 2026 under IRC Section 402(g) is $23,500 for participants under age 50. This is the amount you can contribute as an "employee" of your own business, either as traditional (pre-tax) deferrals or designated Roth contributions. If you are age 50 or older at any point during 2026, you can make an additional catch-up contribution of $7,500 under IRC Section 414(v), bringing your total employee deferral to $31,000. Under the SECURE 2.0 Act, participants ages 60-63 may be eligible for an enhanced catch-up contribution of $11,250 instead of the standard $7,500, raising their total employee deferral to $34,750.

The employer profit-sharing contribution limit allows you to contribute up to 25% of your net self-employment income (for sole proprietors and single-member LLCs) or 25% of your W-2 compensation (for S-Corp owners). This contribution is made by your business and is deductible under IRC Section 404(a)(3).

The Overall Cap -- IRC Section 415(c)

The total of employee deferrals plus employer contributions cannot exceed the lesser of 100% of compensation or the annual IRC Section 415(c) limit, which is $70,000 for 2026 (not including catch-up contributions). With the standard catch-up contribution, the total for participants age 50 and older is $77,500. With the enhanced catch-up for ages 60-63, the total can reach $81,250.

These are per-person limits, meaning if your spouse also works in the business, they can make their own contributions up to the same limits -- potentially doubling the household's total retirement plan contributions.

Calculating the Employer Contribution for Sole Proprietors

The employer contribution calculation for sole proprietors and single-member LLC owners is slightly more complex than it appears. Under IRC Section 401(d), net self-employment income must first be reduced by one-half of self-employment tax (the deductible portion under IRC Section 164(f)) and then by the employee deferral amount. The employer contribution is then 20% of the resulting amount -- not 25% -- because the contribution itself reduces the compensation base. This effective rate of 20% is a mathematical result of the circular calculation required by the statute.

For example, if your Schedule C net profit is $200,000 and your deductible self-employment tax is approximately $14,130, your adjusted net self-employment income is $185,870. After subtracting the $23,500 employee deferral, the remaining $162,370 produces an employer contribution of $32,474 (20% of $162,370). Your total Solo 401(k) contribution would be $55,974 ($23,500 plus $32,474) -- or $63,474 with the standard catch-up contribution.

S-Corp Owner Calculation

If your business is an S-Corporation, the calculation is more straightforward. Your employer contribution is based on your W-2 salary -- up to 25% of that salary. The employee deferral comes out of your paycheck. Setting your W-2 salary at the right level is critical because it directly determines your maximum employer contribution. A salary that is too low limits your retirement plan contribution. A salary that is too high may increase payroll taxes unnecessarily. Finding the optimal balance requires modeling both the payroll tax savings and the retirement plan contribution opportunity.

Roth Option

The Solo 401(k) allows designated Roth contributions on the employee deferral side. These contributions are made with after-tax dollars -- you do not receive a current-year tax deduction -- but qualified distributions in retirement are completely tax-free under IRC Section 402A. For business owners who expect to be in a higher tax bracket in retirement or who want tax diversification, allocating some or all of the employee deferral to Roth can be strategically valuable.

Deadline for Contributions

The Solo 401(k) plan must be established by December 31 of the tax year for which you want to make contributions. Employee deferrals must also be made by year-end. However, employer profit-sharing contributions can be made up to the filing deadline of your tax return, including extensions -- as late as October 15 for sole proprietors who extend their Form 1040. This gives you additional time to fund the employer side after you know your final income numbers.

The Solo 401(k) is the retirement plan of choice for most self-employed individuals without employees. Its high contribution limits, dual contribution structure, Roth option, and loan provisions make it more versatile than a SEP IRA or SIMPLE IRA for virtually every self-employed taxpayer.

This article is for informational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional regarding your specific circumstances. AE Tax Advisors, 935 Lake Elmo Dr, Suite B, Billings, MT 59105. Phone: (631) 614-5762.