A solo 401k, also called an individual or one-participant 401k, is a retirement plan for a business owner with no employees. It lets you save much more than a regular 401k, because you contribute in two roles at once.
Who can have one
The IRS says a one-participant 401k covers a business owner with no employees, or that person and their spouse. You can be a sole proprietor, freelancer, single-member LLC or the owner of an S corporation or other corporation.
The two parts
1. Employee contribution. As the "employee", you can put in up to 100% of your pay, up to the yearly limit. In 2026 that is $24,500, plus $8,000 if you are 50 or older (or $11,250 at 60 to 63).
2. Business (employer) contribution. As the "employer", your business can add up to 25% of compensation.
- For an S corporation owner, compensation means your W-2 pay from the company.
- For a sole proprietor, compensation is your net self-employment earnings after taking off half of your self-employment tax and the contribution itself. In practice that works out to about 20% of your net earnings after half of self-employment tax.
The overall cap
Together, the two parts cannot exceed the overall limit for the year, which is $72,000 in 2026, not counting catch-up contributions. The pay that can be counted is also capped, at $360,000 in 2026.
An example
You are 40 and a sole proprietor with $100,000 of net profit.
- Self-employment tax is about 15.3% of 92.35% of your profit, roughly $14,100. Half is about $7,100.
- Compensation for the plan is about $100,000 − $7,100 = $92,900.
- Business contribution: 20% of that, about $18,600.
- Employee contribution: $24,500.
- Total: about $43,100.
Our solo 401k calculator works this out for you, for both a sole proprietor and an S corporation.
Deadlines
- The employee contribution is generally set by the end of the year, but check your plan documents.
- The business contribution can usually be made up to your tax return due date, including extensions.
Check your plan documents and ask a tax professional, since timing rules can differ.
Paperwork
A solo 401k generally has to file an annual report, Form 5500-EZ, once it has $250,000 or more in assets at the end of the year. Below that, you can usually skip the form, though a final return is generally required in the year the plan ends. A big advantage of a solo 401k is that, with no employees, it does not need nondiscrimination testing.
Solo 401k or SEP IRA?
A SEP IRA only allows the business contribution, so at lower incomes a solo 401k often lets you save more, because of the employee part. A SEP IRA is simpler to set up. If you have employees, a solo 401k is not available.
Watch out for
- Other jobs. The employee limit is shared with any other 401k you contribute to in the year.
- Hiring. If you hire employees who are eligible for the plan, it stops being a solo plan.
- Your own situation. This is general information, so confirm the numbers with a tax professional.
Sources
- IRS: One-participant 401(k) plans
- IRS: 401(k) limit increases to $24,500 for 2026
- Social Security Administration: 2026 COLA fact sheet (wage base)
This article is for education and is not financial, tax or legal advice. Figures are checked against the sources above and may change. Read the full disclaimer.