2026 answer
A business owner wears two hats: employee and employer. In 2026, the employee deferral can be up to $24,500, while total annual additions can reach $72,000 before catch-up. Participants age 50 or older may add $8,000, except ages 60–63 may use the $11,250 higher catch-up if the plan permits it.
2026 Solo 401(k) limits vs. 2025
| Limit | 2026 | 2025 | What it controls |
|---|---|---|---|
| Employee elective deferral | $24,500 | $23,500 | Shared across the participant’s 401(k)/403(b)-type elective deferrals |
| Overall defined-contribution limit | $72,000 | $70,000 | Employee deferral + employer + after-tax contributions; catch-up excluded |
| Age 50+ catch-up | $8,000 | $7,500 | Only if the plan permits catch-up contributions |
| Age 60–63 catch-up | $11,250 | $11,250 | Replaces the regular catch-up for participants in this age band |
| Compensation considered | $360,000 | $350,000 | Applies when determining employer contributions |
Catch-up contributions sit outside the $72,000 annual-additions limit. The $72,000 ceiling is also subject to 100% of plan compensation, so a lower-compensation owner cannot automatically fund the headline maximum.
Employee vs. employer contributions
Employee hat
You may defer up to 100% of eligible compensation, capped at $24,500 before catch-up. This personal limit is generally shared with elective deferrals to another employer’s 401(k), 403(b), and similar plans.
Employer hat
The business can make a nonelective or profit-sharing contribution under the plan formula. S-corporation math generally uses eligible W-2 compensation; a sole proprietor uses the self-employed calculation in Publication 560.
Employees change the plan. A one-participant plan generally covers an owner with no common-law employees, or the owner and spouse. If employees become eligible, coverage and nondiscrimination obligations can apply.
S-corp vs. sole-proprietor contribution math
S corporation
The employee deferral is limited by eligible W-2 compensation. A plan may allow an employer contribution up to 25% of eligible W-2 compensation, but total annual additions stop at $72,000 before catch-up. S-corporation distributions are not compensation for this purpose.
| W-2 compensation | Employee deferral | Employer amount shown | Total before catch-up |
|---|---|---|---|
| $100,000 | $24,500 | $25,000 | $49,500 |
| $200,000 | $24,500 | $47,500 (limited) | $72,000 |
| $300,000 | $24,500 | $47,500 (limited) | $72,000 |
Illustrations assume the plan allows a 25% employer formula, no other annual additions, enough cash, and an owner under age 50. The $200,000 and $300,000 rows cap the employer amount so the total stays at $72,000.
Sole proprietor or working partner
Do not multiply Schedule C profit by 25%. Start with net earnings from self-employment, reduce them for the deductible part of self-employment tax and the self-employed contribution adjustment, then apply Publication 560’s reduced-rate worksheet. A nominal 25% employer rate generally becomes 20% for the self-employed calculation.
Use the calculator for entity-specific mathAdvanced plan design
Mega backdoor Roth capacity is leftover Section 415 space
If the plan accepts employee after-tax contributions and supports conversion or distribution, the available after-tax amount is generally the $72,000 overall limit minus elective deferrals, employer contributions, and other annual additions. The catch-up is outside that limit. A basic brokerage Solo 401(k) document may not support the required features.
Read the mega backdoor Roth guideContribution and filing deadlines
Plan adoption
Adoption timing can differ for a first-year sole proprietor and an existing corporation. Do not wait until filing season without confirming current SECURE 2.0 rules and the provider’s processing cutoff.
Employee election and deposit
The deferral election must satisfy the plan and tax rules. Corporate payroll deferrals generally need to be handled through payroll; deposit timing can be earlier than the tax-return deadline.
Employer contribution
A deductible employer contribution may generally be funded by the employer return due date, including extensions, if the plan and attribution requirements are met.
Form 5500-EZ
A one-participant plan generally files Form 5500-EZ once plan assets reach $250,000 at year-end, and a final filing may be required when the plan terminates.
Coordination traps
- Using the full elective-deferral limit at both a day job and the Solo 401(k)
- Counting S-corp distributions instead of W-2 compensation
- Applying 25% directly to Schedule C profit
- Ignoring related-business or controlled-group employees
- Assuming every plan permits after-tax contributions or Roth conversions
- Missing Form 5500-EZ after crossing the asset threshold
Frequently asked questions
What is the 2026 Solo 401(k) contribution limit?
The 2026 employee elective-deferral limit is $24,500. The overall defined-contribution limit is $72,000, excluding an allowed age-based catch-up. Your actual maximum is also limited by compensation, plan terms, employer contribution rules, and contributions to plans maintained by the same employer.
Can I contribute $72,000 as an employee?
No. The employee elective-deferral piece is generally capped at $24,500 for 2026 before catch-up. Reaching $72,000 requires enough eligible employer contribution and, if the plan permits, potentially employee after-tax contributions.
Does a day-job 401(k) reduce my Solo 401(k) limit?
Your personal elective-deferral limit is aggregated across the applicable plans in which you participate. A separate employer may still make employer contributions to its own plan, subject to the plan and Section 415 limits. Related-business and controlled-group rules can change that analysis.
How does an S-corp owner calculate the employer contribution?
A plan may permit an employer contribution of up to 25% of eligible W-2 compensation, subject to the $72,000 annual-additions limit and the plan document. S-corporation pass-through profit and distributions are not plan compensation for this calculation.
How does a sole proprietor calculate the employer contribution?
A self-employed owner uses adjusted net earnings from self-employment and the reduced-rate method in IRS Publication 560. A nominal 25% plan formula generally becomes a 20% maximum rate after the self-employed adjustment, and the deductible part of self-employment tax is part of the calculation.
Can a Solo 401(k) support a mega backdoor Roth?
Only if the plan document accepts employee after-tax contributions and supports an in-plan Roth conversion or distribution path. The after-tax amount fills unused space under the overall $72,000 limit; it is not an extra limit.
Primary sources
Model the limit before payroll closes
Taxstra can coordinate W-2 compensation, business profit, other employer plans, employer contributions, and plan-document features before a deadline forces the answer.
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