What about my Solo 401(k) contribution?

It depends on who the contribution is for. The employer profit-sharing contribution you make for employees goes on Line 19. The contribution you make for yourself as the owner (both employee elective deferral and employer profit-sharing portions) goes on Form 1040 Schedule 1.

Do I have to cover my employees if I set up a retirement plan?

Yes. If you set up a SEP-IRA or a 401(k), you are generally required to offer it to eligible employees on the same percentage terms you offer yourself. Eligibility typically requires age 21+ and a minimum period of service.

What is the Solo 401(k) contribution limit?

For 2025, the total contribution limit (employee elective deferral + employer profit-sharing) is $70,000, or $77,500 if you are age 50 or older. The employee elective deferral portion is limited to $23,500 ($31,000 with catch-up). The employer profit-sharing portion is limited to 25% of your net self-employment earnings.

When is the deadline to open a SEP-IRA?

You can open and fund a SEP-IRA up to the tax filing deadline for that year, including extensions. That means you can open a SEP-IRA as late as October 15 of the following year if you filed for an extension — one of the most flexible retirement account deadlines available.

What is a Cash Balance Plan and why should I care?

A Cash Balance Plan is a type of defined benefit pension plan. Unlike a SEP-IRA or 401(k), contribution limits are based on your age and target benefit — not a flat percentage. For business owners over 50, annual contributions can reach $200,000+, making it the single most powerful tax shelter available to self-employed professionals. It requires actuarial filings and has minimum contribution commitments, so it is best suited for owners with consistent high income.

Schedule C — Line 19

Pension & Profit-Sharing

Retirement plan contributions for your employees go on Line 19. Your own contributions go somewhere else entirely — getting this wrong is an immediate IRS red flag.

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Line 19 allows you to deduct contributions made to a qualified retirement plan for your employees. SEP-IRA, SIMPLE IRA, or 401(k) contributions you make on behalf of W-2 employees go here. Your own retirement contributions as the business owner — even if the money comes out of the business account — do not belong on Schedule C.

Critical: Owner Contributions Do NOT Go Here

Watch Out

Do NOT List Your Own Retirement Contributions on Line 19

Even though the money physically leaves your business bank account, your personal retirement contribution is deducted on Form 1040, Schedule 1, Line 16 — not on Schedule C.

Putting your own contribution on Line 19 artificially lowers your Schedule C net profit, which lowers your self-employment tax. This is incorrect and an immediate IRS red flag. If you have been doing this, file an amended return.

Key Insight

The logic is counterintuitive but deliberate: your SE tax is based on net Schedule C profit. Your retirement contribution is supposed to reduce income tax, not SE tax. By placing owner contributions on Schedule 1 (not Schedule C), you get the income tax benefit without improperly reducing your SE tax base.

The Major Small Business Retirement Plans

PlanSolo 401(k)

Best ForNo employees (except spouse)

Contribution Limit (2025)$70,000 (2025 total)

Key FeatureRoth option; loan provision

PlanSEP-IRA

Best ForHigh income, simplicity preferred

Contribution Limit (2025)25% of net self-employment income

Key FeatureOpen until tax deadline

PlanSIMPLE IRA

Best ForBusinesses with employees who contribute

Contribution Limit (2025)$16,500 employee deferral (2025)

Key FeatureMust establish by Oct 1

PlanCash Balance Plan

Best ForHigh-income owners age 50+

Contribution Limit (2025)$200,000+ (age-dependent)

Key FeatureActuarial; multi-year commitment

Plan	Best For	Contribution Limit (2025)	Key Feature
Solo 401(k)	No employees (except spouse)	$70,000 (2025 total)	Roth option; loan provision
SEP-IRA	High income, simplicity preferred	25% of net self-employment income	Open until tax deadline
SIMPLE IRA	Businesses with employees who contribute	$16,500 employee deferral (2025)	Must establish by Oct 1
Cash Balance Plan	High-income owners age 50+	$200,000+ (age-dependent)	Actuarial; multi-year commitment

Solo 401(k)

Best For: Business owners with no employees other than a spouse.

Highest contribution limits of any small business plan (up to $70,000 for 2025)
Includes a loan feature — borrow up to 50% of account balance, max $50,000
Roth contribution option available
Once you have non-spouse employees, you can no longer contribute as a "solo" plan

Read the Solo 401(k) Guide →

SEP-IRA

Best For: High-income business owners who want simplicity and minimal admin.

Easy to set up — can open up to the tax filing deadline (including extensions)
Contribute up to 25% of net self-employment earnings, max $70,000 (2025)
Must contribute the same percentage for all eligible employees as you contribute for yourself

SIMPLE IRA

Best For: Businesses with distinct employees where you want employee salary deferrals too.

Employees defer their own salary into the plan
Employer match required — typically 3% of employee compensation
Must be established by October 1 for the current plan year

Common Mistakes on Line 19

The Net Earnings Calculation

SEP-IRA contributions for the owner are calculated on "net self-employment earnings" — Schedule C profit minus one-half of self-employment tax. It is not 25% of gross income. Using the wrong base overstates your allowable deduction.

Excluding Long-Term Part-Timers

Under SECURE Act 2.0, part-time employees who work 500+ hours per year for three consecutive years must be allowed to participate in your 401(k). Excluding them is now a plan qualification violation.

High-Income Owners: Stack Multiple Plans

Taxstra CPA Tip

A Solo 401(k) and a Cash Balance Plan can be layered together for owners with high, consistent income. In a good year, a physician or consultant earning $600,000+ could shelter $250,000 or more in combined contributions — all deductible, all growing tax-deferred. Cash Balance Plans require actuarial involvement and multi-year commitment, but the tax math is compelling at high income levels. This is one of the most impactful planning conversations we have with clients.

Frequently Asked Questions

No. Roth IRA contributions are never tax-deductible (that's why they grow tax-free). Traditional IRA contributions may be deductible on Schedule 1, not Schedule C.

Next Steps

Filing it yourself is fine — optimizing it is where the money is

Getting the form right keeps you out of trouble. The strategies below are what actually lower the bill.

Locum Tenens Tax Guide

Solo 401(k) and retirement stacking for 1099 physicians — how high-earning contractors layer plans to shelter six figures a year.

S-Corp Election Guide

Your entity structure changes the retirement math: an S-Corp shifts how Solo 401(k) and SEP contributions are calculated and what they save you.

Maxing the contribution is step one. Stacking the strategy is step two.

Free 30-minute call with a Taxstra CPA — no pressure, just the math for your situation.

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Want to Shelter More Income in Retirement?

A Taxstra CPA can model the right retirement plan combination for your income level, entity structure, and employee count — and run the numbers on a potential Cash Balance Plan.

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This content is educational and does not constitute individualized tax advice. Tax rules change; verify current-year figures with a qualified CPA before filing.