Solo 401(k) Contribution Calculator 2026

How solo 401(k) contributions are calculated

Two contribution buckets

A solo 401(k) — also called a one-participant 401(k) or individual 401(k) — lets you contribute as both employee and employer. Each bucket has separate rules and limits.

Sole proprietor and SMLLC: the 20% rule explained

If you file Schedule C, your contribution math is slightly different from the 25% headline rate. The IRS requires you to calculate your employer contribution as 25% of net earnings from self-employment after deducting half the SE tax. The practical effect: your employer contribution is approximately 20% of your Schedule C net profit.

For example: $150,000 Schedule C profit → roughly $28,000 employer contribution (not $37,500). That 5-point difference is why the annual additions limit is often not the binding constraint for sole props — it's the 20% effective rate.

S-corp owners: compensation = W-2 salary from the S-corp

For S-corp owners, "compensation" means your W-2 salary from the S-corp — not total revenue or total owner compensation including distributions. The employer contribution is exactly 25% of your W-2 wages. Distributions above your salary are not included. This is why your salary matters for retirement saving, not just FICA minimization.

Age-based catch-up contributions in 2026

The super catch-up for ages 60–63 was created by SECURE 2.0 Act §109 and first applies in 2025. It replaces — it does not stack with — the regular $8,000 catch-up. Your plan document must explicitly allow catch-up contributions; most do.¹

The December 31 deadline you cannot miss

To make employee deferral contributions for 2026, your solo 401(k) plan document must be established (signed) by December 31, 2026. You have until the business tax filing deadline (plus extensions) to actually make the employer profit-sharing contribution. Miss December 31, and you cannot elect deferrals for that year — the employer contribution is the only option if you set up the plan in January 2027. This is the most important operational difference from a SEP IRA, which can be established as late as the tax deadline.

Solo 401(k) vs SEP IRA: which allows more?

For most self-employed people earning over $100,000, the solo 401(k) allows significantly higher contributions. The difference is the employee deferral bucket — SEP IRA is employer-only at 25% of compensation, while solo 401(k) adds an employee deferral of up to $35,750 on top.

Assumes age under 50, sole prop/SMLLC entity, 2026 limits. Employer contributions computed as 25% of (gross − ½ SE tax), per IRS sole-prop formula. SS wage base $184,500. Annual additions cap $72,000.

The pattern is consistent: at most income levels the solo 401(k) advantage is almost exactly $24,500 — the employee deferral bucket that SEP IRA simply doesn't have. The gap only shrinks above ~$275,000 of net income, where the SEP IRA employer-only contribution starts approaching $72,000 on its own. Above ~$385,000, both plans hit the $72,000 ceiling and produce the same deduction. The remaining difference at that point is Roth optionality and loan availability — which only the solo 401(k) provides.

Stacking with a cash balance plan

Business owners who have maxed out their solo 401(k) — or who are over 50 and want substantially larger deductions — can layer a cash balance plan on top. Contributions to the defined benefit plan are separate from the §415(c) annual additions limit that governs solo 401(k) contributions. A well-designed stack at age 52 with $380,000 in net income can deduct:

• Solo 401(k): $32,500 (deferral) + $39,500 (employer) = $72,000
• Cash balance plan contribution: ~$130,000–$200,000 depending on actuarial design
• Total annual deduction: $202,000–$272,000

The cash balance plan requires an actuary to design and costs $4,000–$9,000 per year in administration. At high income and close to retirement, it typically pays for itself several times over in the first year alone.

Common calculation mistakes to avoid

• Using gross revenue instead of net profit. For a sole prop, your contribution base is Schedule C net profit — after expenses, not before.
• Forgetting the ½ SE tax deduction for sole props. The effective employer contribution rate is ~20% of net profit, not 25%.
• Applying the 25% rate to S-corp distributions. Only W-2 wages from the S-corp count toward retirement contribution limits. Distributions don't.
• Assuming the annual additions limit includes catch-up. The $72,000 limit does not include catch-up contributions. You can contribute up to $83,250 in 2026 if you qualify for the super catch-up.
• Missing the December 31 plan establishment deadline. You cannot elect employee deferrals for a year after the year has ended.