A solo 401(k) is a regular 401(k) plan established by a self-employed person or small business owner for themselves — and optionally their spouse — with no other eligible employees. The IRS calls it a “one-participant 401(k)” (IRS.gov/retirement-plans/one-participant-401k-plans).
The key advantage over other self-employment retirement accounts: you wear two hats. As the employee, you can contribute up to the employee elective deferral limit. As the employer, you can add a profit-sharing contribution on top of that. The combined total can be significantly higher than the SEP-IRA contribution ceiling at the same income level.
How contributions work
Solo 401(k) contributions come from two sources:
Employee elective deferrals — up to $23,500 in 2025 ($24,500 in 2026), regardless of business income. This is the same limit as an employee contributing to a workplace 401(k). If you’re 50 or older, the catch-up contribution applies: +$7,500 in 2025 (+$8,000 in 2026). Ages 60–63 get the SECURE 2.0 special catch-up: +$11,250.
Employer profit-sharing contributions — up to 25% of net self-employment income (after deducting the self-employment tax deduction).
The total from both sources cannot exceed the annual additions limit: $70,000 in 2025 ($71,000 in 2026), not counting catch-up contributions.
How contributions compare to SEP-IRA at the same income
At lower income levels, the solo 401(k) allows substantially higher contributions because of the employee deferral. The SEP-IRA is limited to 25% of net self-employment income with no employee deferral component.
| Net self-employment income | Solo 401(k) max (2025) | SEP-IRA max (2025) |
|---|---|---|
| $30,000 | ~$27,500 | ~$7,500 |
| $50,000 | ~$35,700 | ~$12,500 |
| $80,000 | ~$43,700 | ~$20,000 |
| $120,000 | ~$53,700 | ~$30,000 |
| $200,000+ | $70,000 (cap) | ~$50,000 |
(Illustrative examples based on 2025 limits; actual amounts depend on exact net SE income and applicable deductions. Consult a tax professional for your situation.)
At high income levels (roughly $200,000+ in net SE income), the SEP-IRA closes the gap because the 25% employer contribution dominates. But for most self-employed people earning under $150,000, the solo 401(k) allows meaningfully larger contributions.
Traditional vs Roth solo 401(k)
Many solo 401(k) providers offer both traditional (pre-tax) and Roth options. The employee deferral portion can be made as either traditional or Roth; employer profit-sharing contributions must be traditional (pre-tax), regardless.
This Roth option is not available in a SEP-IRA, giving the solo 401(k) additional flexibility for people who want tax-free growth on a portion of their retirement savings.
Who qualifies
You qualify for a solo 401(k) if you have self-employment income from any source — freelance work, consulting, a side business — and no full-time employees other than a spouse. Part-time employees who work fewer than 1,000 hours per year and meet certain age and service requirements may be excludable (plan-specific rules apply).
If you hire a full-time employee, you must either include them in the 401(k) or switch to a different plan type that covers employees.
Your spouse can participate if they earn income from the business — effectively doubling the contribution capacity of the household for that business.
Setting one up
Solo 401(k) plans are offered by major brokerages (Fidelity, Vanguard, Schwab, E*TRADE) with no annual fees. To make employee elective deferrals for a given tax year, the plan must be established by December 31 of that year. Employer profit-sharing contributions can be made up until the tax filing deadline (including extensions).
If your solo 401(k) plan assets exceed $250,000, you must file IRS Form 5500-EZ annually. Below that threshold, no separate annual filing is required.
When the SEP-IRA is simpler
For high earners who don’t need the Roth option and want simpler administration, the SEP-IRA is easier to set up and has no December 31 establishment deadline — it can be opened up to the tax filing deadline of the prior year. Many accountants recommend the solo 401(k) for its higher contribution ceiling at moderate incomes, and the SEP-IRA for simplicity when income is consistently high.
Key dates and limits
| 2025 | 2026 | |
|---|---|---|
| Employee deferral limit | $23,500 | $24,500 |
| Catch-up (age 50–59, 64+) | +$7,500 | +$8,000 |
| Special catch-up (age 60–63) | +$11,250 | +$11,250 |
| Annual additions limit (total) | $70,000 | $71,000 |
| Plan must be established by | Dec 31 of tax year | Dec 31 of tax year |
| Employer contribution deadline | Tax filing deadline + extensions | Tax filing deadline + extensions |