401kSolo 401(k) Tax Rules
A Solo 401(k) lets a self-employed person contribute to the same plan wearing two hats — as the employee and as the employer — which can allow larger total contributions than many other self-employed retirement options.
Reviewed January 2026 against current IRS guidance.
Who can use one
A Solo 401(k) (also called a one-participant 401(k)) is available to a self-employed individual or business owner with no employees other than a spouse. If you later hire employees who meet the plan's eligibility requirements, the plan generally must be converted to a standard 401(k) covering those employees, subject to nondiscrimination testing rules that don't apply to a true one-participant plan.
Two contribution roles, one person
In a Solo 401(k), you can contribute both as the “employee” (an elective deferral from your own compensation) and as the “employer” (a profit-sharing-style contribution based on business income) — which is why total contribution potential can be significantly higher than a SEP-IRA at the same income level for many business owners.
- Employee contribution: up to the standard employee elective deferral limit (the same limit as any other 401(k) — see contribution limits), plus catch-up contributions if you're eligible by age.
- Employer contribution: generally up to 25% of your net self-employment compensation (the calculation differs slightly for a sole proprietor/single-member LLC versus an S-corp or C-corp, since self-employment tax and W-2 wages are computed differently).
Both pieces together are capped by the same overall (Section 415) limit that applies to any other 401(k).
Roth Solo 401(k) contributions
Many Solo 401(k) providers offer a Roth option for the employee-deferral portion, taxed the same way as a Roth 401(k) in an employer plan. The employer (profit-sharing) contribution portion has traditionally had to be pre-tax, though SECURE 2.0's provision allowing Roth employer contributions can apply here as well if your plan and provider support it.
Deadlines
The plan itself generally must be established by your business's tax filing deadline (including extensions) for the year you want to make employer contributions, though a rule from a 2019 tax law change now allows a plan to be adopted as late as the filing deadline (with extensions) and still count employer contributions for the prior year, in most cases. Employee elective deferral elections, by contrast, generally must be made before the compensation they relate to is earned. Because these deadlines interact with your specific business structure and tax filing situation, this is an area where a tax professional's input is especially worthwhile before year-end.