Solo 401(k) Calculator

Contribution room in a one-person 401(k), using 20% of net earnings for a sole proprietor not the 25% that overstates it.

The error that makes most solo 401(k) calculators wrong

Search for a solo 401(k) calculator and most of the results will apply 25% to your business profit. The number that comes out is too big. Too big is the dangerous direction—an excess contribution has to be withdrawn, with its earnings, and the IRS penalises it.

Two things are wrong with it.

The rate. The statute allows 25% of compensation, but for a sole proprietor the contribution is itself deductible, so it reduces the compensation it's measured against. Solve that circularity and you get 20% of net earnings before the contribution. Same rule, expressed from the side you can actually compute.

The base. Net earnings aren't profit. They're profit less half of your self-employment tax, and that tax is computed on 92.35% of profit, so the adjustment is smaller than a straight halving of the headline rate.

On $150,000 of profit those two corrections together move the answer by several thousand dollars. That isn't a rounding difference.

You're the employee and the employer, and both of you may contribute

Two contributions from the same person is what makes a solo 401(k) worth the paperwork.

As the employee you defer up to $24,500 for 2026, or all of your earnings if they're less. This part doesn't scale with profit. It's the same allowance the IRS gives a salaried employee, and it's available in full even in a modest year, which is exactly why the SEP comparison below comes out the way it does.

As the employer you contribute a percentage of the base: 20% of net earnings for a sole proprietor, 25% of W-2 wage for an S-corporation. This part does scale, so it's the half that grows as the business does.

Both land in the same account. The split matters only for how the limits apply, and the combined total of the two halves is held under §415(c) to the lesser of $72,000 or 100% of your compensation, which is the limb that bites in a lean year. That ceiling isn't a solo-plan rule at all; it's the same §415(c) figure every 401(k) is held to, and it applies here unchanged.

Which means the projection is unchanged too. Once the year's contribution is settled, a solo balance compounds like any other, so the standard 401(k) calculator runs it forward without knowing or caring that you're the employer.

How do you work out a solo 401(k) contribution by hand?

Take Schedule C profit down to net earnings, apply 20% to get the employer half, add your employee deferral, then test the pair against §415(c). The order is fixed. Each step feeds the one after it, and the figures below are the ones the calculator opens with.

1. Start with net business profit from Schedule C. Here that's $150,000.
2. Multiply by 92.35% to reach the self-employment tax base: $138,525. That haircut stands in for the employer half of FICA, which a self-employed person pays and an employee never sees on a payslip.
3. Work self-employment tax on that base. You owe both halves, so twice the 6.2% Social Security and 1.45% Medicare an employee pays, with Social Security stopping at the $184,500 wage base and Medicare carrying on past it. On $138,525 that's $21,194.
4. Halve the tax and take it off profit. $10,597 off $150,000 leaves net earnings of $139,403, and that is the compensation figure everything else is measured against.
5. Take 20% of net earnings for the employer contribution: $27,881.
6. Add your employee deferral on top, up to $24,500 for 2026 or your whole base if that comes to less. At 45 no catch-up applies, so the full $24,500 goes in.
7. Test the two together against §415(c), which allows the lesser of $72,000 or 100% of compensation. $27,881 plus $24,500 is $52,381, inside both limbs, so nothing is cut back.

Step five is where it goes wrong. Apply 25% to the $150,000 of profit and you get $37,500, which is $9,619 of employer room that doesn't exist, and the mistake survives because the statute really does say 25%. What the statute measures it on is compensation after the contribution has come out, and you can't know that until you know the contribution, so the algebra folds back on itself. Solving it gives 20% of net earnings before the contribution. Watch step seven as well: in a lean year the 100%-of-compensation limb binds long before $72,000 does, because the compensation it looks at is what's left once your own deferral has already gone.

Against a SEP-IRA, the employee deferral is the whole argument

A SEP-IRA allows only the employer side. That's the entire comparison, and at modest income it's decisive.

At $100,000 of net earnings a SEP allows roughly $20,000. A solo 401(k) allows that plus the employee deferral, which nearly doubles it. The gap closes only at high income, where both hit the $72,000 ceiling and the difference becomes a rounding error.

A SEP doesn't touch your IRA allowance. It does make you covered by a plan for the deduction test, which is a separate question with its own income ranges, and both of those figures sit on the IRA limits page.

A SEP has real advantages, though. It's simpler to open, there's no Form 5500-EZ to think about, and it can be set up after the year has ended, at the point when you're doing the return and can see what the business actually made. If the business earns enough to max out either plan, those conveniences may well win. Below that, the employee deferral is worth the extra form.

The spouse provision roughly doubles the household allowance

A spouse who genuinely works in the business and is paid a wage for it gets their own employee deferral and their own employer contribution, computed on that wage and not on your profit. For a couple running a business together this roughly doubles the household allowance, and as far as I can tell no other small-business plan does it as cleanly.

Two conditions apply, and the IRS checks both. The work has to be genuine and the pay has to be reasonable for it. Putting a spouse on the payroll for a nominal role in order to open a second set of contributions is exactly the arrangement examiners look for.

Questions for whoever files your return, because this page can't see the answers

For an S-corporation there's a live tension. A lower W-2 wage saves payroll tax but shrinks the base your 25% employer contribution is computed on, so a wage low enough to please the payroll-tax side can leave real contribution room on the table. There's no universally right answer. It depends on figures this page can't see, and it's exactly the sort of question to put to whoever files your return.

Also outside this calculator: contribution deadlines, which differ between the two halves; Form 5500-EZ, which becomes required once plan assets pass a threshold; and defined benefit or cash balance plans, which allow far larger contributions at high income and are worth asking about if you're consistently hitting the $72,000 ceiling here.

If you also have a 401(k) at a job, the $24,500 deferral limit is yours, not the plan's, and it's shared between the two. The employer side isn't, since each unrelated employer has its own §415(c) ceiling. The limits page covers how the two interact.

Frequently asked questions

How much can I contribute to a solo 401(k)?

Two contributions from the same person. As the employee, up to $24,500 for 2026, or all of your earnings if they're lower. As the employer, 20% of net earnings if you're a sole proprietor or single-member LLC, or 25% of your W-2 wage if you've elected S-corporation treatment. Both halves stop at $72,000 under §415(c).

Why is the employer contribution 20% and not 25%?

For a sole proprietor the deduction reduces the earnings the contribution is calculated on, so 25% of post-contribution net earnings works out at 20% of net earnings before it. This is the error solo 401(k) calculators make most often, and it errs in the dangerous direction: it overstates your room, and an excess contribution has to be removed and is penalised.

What counts as net earnings for a solo 401(k)?

Net business profit from Schedule C, less half of your self-employment tax. Not gross revenue. Not profit before the self-employment tax adjustment either. Self-employment tax is itself computed on 92.35% of profit, so the deduction is smaller than a straight half of the headline rate suggests.

Is a solo 401(k) better than a SEP-IRA?

At modest income, usually, because the solo plan allows an employee deferral on top of the employer contribution while a SEP only allows the employer side. At $100,000 of net earnings that difference is worth roughly the whole $24,500 deferral. The advantage narrows at high income, where both reach the §415(c) ceiling, and a SEP is simpler to open and has no annual filing to think about.

Can my spouse contribute to my solo 401(k)?

Yes, if they genuinely work in the business and are paid for it, and it's the plan's biggest advantage. A spouse gets their own employee deferral and their own employer contribution, so the household total can be close to double. The work must be real and the pay reasonable for it. This is an area the IRS examines.

Can I have a solo 401(k) and a 401(k) at a job?

Yes, but the $24,500 employee deferral limit belongs to you, not to a plan, and it's shared across both. The employer side is separate. Each unrelated employer has its own §415(c) ceiling, so your business can still make its employer contribution even if you've maxed the deferral at work.