For high-income, self-employed individuals and small business owners with no full-time employees, the Solo 401(k) remains the gold standard for tax-efficient retirement savings. Whether you're running a business as a sole proprietor, single-member LLC, or S corporation, this plan offers unrivaled flexibility and generous contribution limits.
In this comprehensive guide, we’ll walk through everything you need to know about Solo 401(k)s in 2025—including the latest IRS limits, key deadlines, business structure nuances, and planning tips.
A Solo 401(k)—also called an Individual 401(k), Uni-K, or Self-Employed 401(k)—is designed for:
If your business employs full-time workers (1,000+ hours/year) or long-term part-time workers meeting SECURE Act thresholds, a Solo 401(k) may no longer be an option. Otherwise, it’s a powerful retirement vehicle for consultants, freelancers, independent contractors, and small business owners.
The IRS raised the limits for 2025, allowing even greater pre-tax or Roth savings.
This includes employee deferrals, as well as employer contributions.
These can be pre-tax or Roth, depending on your plan’s features.
💡 The employer portion is always pre-tax—unless your plan supports Roth employer contributions under SECURE 2.0.
Let’s examine how contribution calculations vary depending on your business entity.
Your contribution is based on net self-employment income from Schedule C, minus the deduction for 50% of self-employment tax.
📌 Remember: You can only defer up to 100% of net earnings, capped at $23,500.
If you’ve elected S corp status, your contributions are based on W-2 wages, not business profits or distributions.
S corp profits (K-1 income) don’t count toward Solo 401(k) contributions. Only your payroll does.
💡 Planning strategy: Optimize your W-2 salary to balance payroll tax efficiency and retirement contribution headroom.
The same rules apply. Each shareholder-employee can contribute based on their individual W-2 wage, assuming no other employees qualify under long-term part-time rules.
Spouses working in the business can also participate and double the household’s total contributions.
Solo 401(k)s often allow Roth employee deferrals, giving you the option of:
Starting in 2023, thanks to SECURE 2.0, employer contributions can be designated as Roth if your plan and provider support it. As of 2025, adoption is still rolling out among major custodians.
🧠 If you’re early in your career or expect to be in a higher tax bracket later, Roth deferrals can be powerful.
If you miss the plan establishment deadline, you can’t retroactively contribute for 2025.
If your spouse works in the business and earns compensation, they can contribute just like you.
This allows $140,000+ in combined household contributions, assuming sufficient business income.
Many Solo 401(k) providers allow loans of:
Repayments must be made quarterly, over five years (unless used for a primary residence). Interest is paid back into your own account.
📌 Loan defaults are considered taxable distributions and may trigger a 10% early withdrawal penalty.
Solo 401(k)s accept roll-ins from:
Rollovers help you consolidate assets and possibly increase your loan availability (loan limits are based on account balance).
If your Solo 401(k) balance exceeds $250,000, you must file Form 5500-EZ by July 31, 2026.
Penalties for late filing can reach $250/day, so don’t miss this requirement.
You don’t need to file anything with the IRS below that asset threshold unless you’re closing the plan.
The SECURE 2.0 Act expanded 401(k) eligibility rules for part-time workers, requiring that those who work 500+ hours for two consecutive years become eligible.
This provision doesn’t apply to Solo 401(k)s unless you hire non-owner employees. If your business grows and adds team members, you may need to convert to a traditional 401(k) plan.
Your choice of provider will depend on features you need:
If you want to invest in real estate, crypto, or do Roth employer contributions, consider a customized Solo 401(k) with a self-directed provider.
With a $70,000 contribution limit ($77,500 if 50+), optional Roth features, and the ability to borrow against your own balance, the Solo 401(k) is a cornerstone of tax and retirement planning for self-employed individuals in 2025.
However, the real value lies in how well you align the plan with your business structure and personal tax strategy. Whether you’re a consultant, freelancer, or S corp owner paying yourself wages, getting the structure right ensures you don’t leave money on the table.