2025 Contribution Limits
| Component | Under 50 | 50-59 or 64+ | 60-63 (Super Catch-Up) |
|---|---|---|---|
| Employee deferral | $23,500 | $23,500 | $23,500 |
| Standard catch-up | — | $7,500 | — |
| Super catch-up (SECURE 2.0) | — | — | $11,250 |
| Employer profit-sharing | 25% of comp* | 25% of comp* | 25% of comp* |
| Maximum total (§415(c)) | $70,000 | $77,500 | $81,250 |
*For sole proprietors, "comp" is net SE income minus 50% of SE tax, then the employer contribution is 20% of that amount (not 25%). See calculation below.
Sole Proprietor Calculation
The employer contribution calculation for sole proprietors is more complex than for S-Corp owners because of the circular self-employment tax computation:
- Start with Schedule C net profit
- Subtract 50% of SE tax (the deductible portion)
- That gives you "adjusted net self-employment income"
- Employer contribution = 20% of that amount (not 25% — the reduction accounts for the fact that you're both employer and employee)
Worked Example: $150,000 Schedule C Profit
- SE tax: $150,000 × 92.35% × 15.3% = $21,194 (approximately)
- 50% SE tax deduction: $10,597
- Adjusted SE income: $150,000 - $10,597 = $139,403
- Employer contribution (20%): $27,881
- Employee deferral: $23,500
- Total: $51,381
S-Corp Owner Calculation
For S-Corp shareholder-employees, the calculation is simpler:
- Employee deferral: up to $23,500 from W-2 salary
- Employer contribution: up to 25% of W-2 salary
- Total cannot exceed $70,000 (or $77,500/$81,250 with catch-up)
Worked Example: $100,000 S-Corp Salary
- Employee deferral: $23,500
- Employer contribution (25%): $25,000
- Total: $48,500
Note: The employer profit-sharing contribution is a deductible business expense for the S-Corp, reducing S-Corp income (and therefore QBI). This interaction should be considered alongside QBI optimization.
Frequently Asked Questions
What is the maximum Solo 401(k) contribution for 2025?
The maximum Solo 401(k) contribution for 2025 is $70,000 (under age 50), $77,500 (age 50-59 or 64+), or $81,250 (age 60-63 under the SECURE 2.0 super catch-up). This includes both employee deferrals ($23,500) and employer profit-sharing (up to 25% of compensation). Authority: IRC §415(c).
How do I calculate Solo 401(k) employer contribution as a sole proprietor?
For sole proprietors, the employer contribution is 20% (not 25%) of net self-employment income after subtracting 50% of self-employment tax. Example: $150,000 Schedule C profit → subtract ~$10,597 (50% SE tax) → $139,403 × 20% = $27,881 employer contribution.
What is the Solo 401(k) super catch-up contribution?
Under SECURE 2.0, individuals aged 60-63 can make an enhanced catch-up contribution of $11,250 (instead of the standard $7,500) for 2025. This brings the maximum total contribution to $81,250 ($23,500 deferral + $11,250 super catch-up + employer contribution up to the §415(c) limit).
Can I have a Solo 401(k) and an S-Corp?
Yes. S-Corp shareholder-employees can establish a Solo 401(k) through the S-Corp. Employee deferrals come from W-2 salary, and the S-Corp makes employer profit-sharing contributions (up to 25% of salary). The employer contribution is a deductible S-Corp business expense.