Solo K Contribution Calculator

Calculate your maximum employee and employer contributions for your self-employed retirement plan.

Your Solo 401(k) Contribution Summary

Contribution Limits & Details (2024)

Category	Limit	Notes
Employee Deferral (Under 50)	$23,000	Up to 100% of compensation
Catch-Up Contribution (Age 50+)	+$7,500	Additional employee deferral
Overall Contribution Limit (Under 50)	$69,000	Employee + Employer combined
Overall Contribution Limit (Age 50+)	$76,500	Employee + Employer combined (incl. catch-up)
Employer Contribution Rate	25%	Of net adjusted self-employment income (effectively 20% of pre-deduction income)

Key figures for Solo 401(k) contributions in 2024.

What is a Solo 401(k) Contribution Calculator?

A Solo 401(k) contribution calculator is an essential online tool designed for self-employed individuals and small business owners with no full-time employees (other than a spouse). It helps you determine the maximum amount you can contribute to your Solo 401(k) plan for a given tax year. By inputting your net adjusted self-employment income, the calculator breaks down your potential contributions into employee and employer components, considering IRS limits and rules. Understanding these limits is crucial for maximizing your retirement savings while optimizing your tax benefits. This tool simplifies complex IRS regulations, making retirement planning more accessible for entrepreneurs.

Who Should Use It?

This calculator is specifically for:

• Sole Proprietors: Individuals operating businesses without forming a separate legal entity.
• Partners in Partnerships: Where income is reported on Schedule K-1.
• Freelancers and Independent Contractors: Who receive 1099 income.
• Small Business Owners: With no full-time employees, except possibly a spouse.
• Business Owners with a Spouse: Who also earns income and wants to participate in the plan.

If you're self-employed and looking to save aggressively for retirement while taking advantage of tax deductions, a Solo 401(k) is a powerful option, and this calculator helps you leverage it effectively.

Common Misconceptions

• "I can only contribute as an employee": Solo 401(k)s allow both employee and employer contributions, significantly increasing savings potential.
• "It's too complicated to calculate": While the rules are detailed, calculators like this simplify the process.
• "My income is too low": Even with modest income, you can make meaningful contributions, especially as an employee.
• "I have to choose between employee and employer contributions": You can and should make both to maximize your savings.

Solo 401(k) Contribution Formula and Mathematical Explanation

The calculation for a Solo 401(k) involves several steps, accounting for self-employment taxes and the distinct employee and employer contribution limits. The primary goal is to determine the maximum allowable contributions based on your net adjusted self-employment income.

Step-by-Step Derivation

1. Calculate Net Earnings from Self-Employment: This is your gross business income minus deductible business expenses.
2. Calculate Self-Employment (SE) Tax: SE tax is 15.3% (12.4% Social Security + 2.9% Medicare) on 92.35% of your net earnings from self-employment.
3. Calculate Deductible Portion of SE Tax: You can deduct one-half of your calculated SE tax.
4. Calculate Net Adjusted Self-Employment Income: This is your Net Earnings from Self-Employment minus the deductible portion of your SE tax. This is the figure used for contribution calculations.
5. Calculate Employee Contribution: This is the lesser of:
   • 100% of your Net Adjusted Self-Employment Income.
   • The annual employee deferral limit ($23,000 for 2024, or $30,500 if age 50 or older including catch-up).
6. Calculate Employer Contribution: This is up to 25% of your Net Adjusted Self-Employment Income. Mathematically, this is equivalent to 20% of your Net Adjusted Self-Employment Income *before* deducting the employer contribution. The formula is: 0.25 * (Net Adjusted SE Income – Employer Contribution). Rearranging, it becomes 0.20 * Net Adjusted SE Income.
7. Calculate Total Contribution: Sum of Employee Contribution and Employer Contribution.
8. Apply Overall Contribution Limit: The total contribution cannot exceed the overall annual limit ($69,000 for 2024, or $76,500 if age 50 or older including catch-up).

Variable Explanations

Here are the key variables involved in the Solo 401(k) contribution calculation:

Variable	Meaning	Unit	Typical Range (2024)
Gross Business Income	Total revenue from self-employment activities.	Currency ($)	$0+
Deductible Business Expenses	Costs incurred in operating the business.	Currency ($)	$0+
Net Earnings from SE	Gross Income – Deductible Expenses.	Currency ($)	$0+
SE Tax Rate	Social Security and Medicare taxes.	Percentage (%)	15.3%
SE Taxable Base	92.35% of Net Earnings from SE.	Currency ($)	$0+
SE Tax Amount	SE Tax Rate * SE Taxable Base.	Currency ($)	$0+
Deductible SE Tax	0.5 * SE Tax Amount.	Currency ($)	$0+
Net Adjusted SE Income	Net Earnings from SE – Deductible SE Tax.	Currency ($)	$0+
Employee Contribution Limit	Annual IRS limit for employee deferrals.	Currency ($)	$23,000 (or $30,500 if 50+)
Employer Contribution Rate	Maximum percentage of compensation allowed for employer contributions.	Percentage (%)	25% (effectively 20% of pre-deduction income)
Overall Contribution Limit	Maximum combined employee and employer contributions.	Currency ($)	$69,000 (or $76,500 if 50+)

Practical Examples (Real-World Use Cases)

Example 1: Single Owner, High Income

Scenario: Sarah is a freelance graphic designer. Her net adjusted self-employment income for the year is $150,000. She is 45 years old and has no employees.

Inputs:

• Net Adjusted Self-Employment Income: $150,000
• Contribution Type: Pre-tax
• Plan Type: Individual (No Employees)

Calculations:

• Employee Contribution: Lesser of $150,000 or $23,000 (2024 limit). So, $23,000.
• Employer Contribution: 25% of $150,000 = $37,500. (Or 20% of $150,000 = $30,000, which is the correct calculation based on net adjusted income). Let's re-calculate employer contribution: 20% of $150,000 = $30,000.
• Total Contribution: $23,000 (Employee) + $30,000 (Employer) = $53,000.
• Check Overall Limit: $53,000 is less than the $69,000 overall limit for 2024.

Results:

• Employee Contribution: $23,000
• Employer Contribution: $30,000
• Total Contribution: $53,000

Interpretation: Sarah can contribute a significant $53,000 to her Solo 401(k), reducing her taxable income by this amount (since she chose pre-tax). This is a powerful way to save for retirement.

Example 2: Owner with Spouse, Moderate Income

Scenario: John and Jane are married and run a consulting business together. John's net adjusted SE income is $100,000, and Jane's is $60,000. They are both under 50.

Inputs:

• John's Net Adjusted SE Income: $100,000
• Jane's Net Adjusted SE Income: $60,000
• Contribution Type: Roth
• Plan Type: Spouse Included

Calculations for John:

• Employee Contribution: Lesser of $100,000 or $23,000. So, $23,000.
• Employer Contribution: 20% of $100,000 = $20,000.
• Total John: $23,000 + $20,000 = $43,000.

Calculations for Jane:

• Employee Contribution: Lesser of $60,000 or $23,000. So, $23,000.
• Employer Contribution: 20% of $60,000 = $12,000.
• Total Jane: $23,000 + $12,000 = $35,000.

Total Plan Contribution: $43,000 (John) + $35,000 (Jane) = $78,000.

Check Overall Limit: The total plan contribution ($78,000) exceeds the individual limit ($69,000). Therefore, the total contribution is capped at $69,000.

Adjusted Contributions to meet $69,000 cap: They can proportionally reduce contributions or prioritize one type. A common approach is to maximize employee deferrals first ($23,000 each = $46,000) and then allocate the remaining $23,000 ($69,000 – $46,000) to employer contributions. This would mean John gets $20,000 employer + $23,000 employee = $43,000. Jane gets $12,000 employer + $23,000 employee = $35,000. Total = $78,000. The cap is $69,000. They need to reduce by $9,000. They could reduce employer contributions. John: $20,000 -> $15,500. Jane: $12,000 -> $7,500. Total employer: $23,000. Total plan: $46,000 (employee) + $23,000 (employer) = $69,000.

Results (Adjusted for Cap):

• John Employee: $23,000
• John Employer: $15,500
• John Total: $38,500
• Jane Employee: $23,000
• Jane Employer: $7,500
• Jane Total: $30,500
• Total Plan Contribution: $69,000

Interpretation: Even with moderate incomes, John and Jane can collectively save $69,000. Choosing Roth means these contributions won't be tax-deductible now, but qualified withdrawals in retirement will be tax-free.

How to Use This Solo 401(k) Contribution Calculator

Using the Solo 401(k) Contribution Calculator is straightforward. Follow these steps to get your personalized contribution estimates:

1. Enter Net Adjusted Self-Employment Income: Input your business's net income after deducting half of your self-employment taxes. If you're unsure, consult your tax professional or use a self-employment tax calculator first.
2. Select Contribution Type: Choose 'Pre-tax' if you want to reduce your current taxable income, or 'Roth' if you prefer tax-free withdrawals in retirement.
3. Choose Plan Type: Select 'Individual' if you are the only participant. Choose 'Spouse Included' if your spouse also earns income from the business and will participate.
4. Enter Spouse's Income (If Applicable): If you selected 'Spouse Included', enter your spouse's net adjusted self-employment income in the provided field.
5. Click 'Calculate Contributions': The calculator will instantly display your estimated employee and employer contributions, total personal contribution, total plan contribution, and the relevant IRS limits.

How to Read Results

• Employee Contribution: The amount you can contribute from your earnings, up to the annual limit.
• Employer Contribution: The additional amount your "business" can contribute on your behalf.
• Total Contribution (Your): The sum of your employee and employer contributions.
• Spouse Contributions (If Applicable): Separate breakdowns for your spouse's contributions.
• Total Plan Contribution: The combined total contributions for all participants in the plan.
• Contribution Limit (2024): The maximum allowed by the IRS for the current year. Your total contribution cannot exceed this.
• Primary Highlighted Result: Typically shows the Total Contribution (Your) or Total Plan Contribution, emphasizing the maximum potential savings.

Decision-Making Guidance

Use the results to inform your retirement savings strategy. If your calculated total contribution is below the overall limit, consider increasing your income or adjusting business expenses to allow for higher contributions. The choice between Roth and Pre-tax depends on your current vs. expected future tax bracket. Use the 'Copy Results' button to save your figures for tax planning.

Key Factors That Affect Solo 401(k) Results

Several factors influence the maximum Solo 401(k) contributions you can make:

1. Net Adjusted Self-Employment Income: This is the most critical factor. Higher income generally allows for higher contributions, up to the IRS limits.
2. Age (Catch-Up Contributions): Individuals aged 50 and over can make additional "catch-up" employee contributions, increasing their total savings potential.
3. Business Profitability: Consistent profits are necessary to generate the income required for substantial contributions. Losses or low profits limit your contribution capacity.
4. Self-Employment Tax Calculation: The calculation of SE tax and its deductible portion directly impacts your net adjusted SE income, affecting both employee and employer contribution bases.
5. Spouse's Income and Participation: If your spouse earns income and participates, the total household contribution potential increases significantly, but is still subject to individual limits based on their income and the overall plan limit.
6. IRS Contribution Limits: Annual limits set by the IRS for employee deferrals, employer contributions, and the overall combined limit are hard caps that cannot be exceeded. These limits are adjusted periodically for inflation.
7. Contribution Type (Roth vs. Pre-tax): While the calculation of the contribution *amount* is the same, the choice affects your current tax liability and future tax treatment of withdrawals.
8. Plan Administration and Fees: While not directly affecting the calculation of maximum contributions, administrative fees can reduce the net amount invested. Choosing a plan with reasonable fees is important.

Frequently Asked Questions (FAQ)

Q1: What is "Net Adjusted Self-Employment Income"?

A: It's your net earnings from self-employment after subtracting one-half of your self-employment taxes. This is the figure used to calculate your contribution limits.

Q2: Can I contribute to a Solo 401(k) if I also have a W-2 job?

A: Yes, but your contributions to the Solo 401(k) are limited based on your self-employment income, and your contributions to the 401(k) from your W-2 job count towards the same overall employee deferral limit ($23,000 in 2024).

Q3: What happens if my calculated contribution exceeds the IRS limit?

A: You must reduce your contributions to not exceed the applicable IRS limits (employee deferral, employer contribution, and overall combined limit). The calculator helps identify this.

Q4: How is the employer contribution calculated? Is it really 25%?

A: The employer contribution is up to 25% of your net adjusted self-employment income *after* deducting the employer contribution itself. This effectively means it's 20% of your net adjusted self-employment income *before* the employer contribution deduction.

Q5: Can I contribute to both a Solo 401(k) and a SEP IRA?

A: No, you generally cannot contribute to both a Solo 401(k) and a SEP IRA for the same business in the same year. You must choose one plan.

Q6: When is the deadline to establish and fund a Solo 401(k)?

A: You can establish a Solo 401(k) plan anytime up to December 31st of the tax year. Contributions can typically be made until the tax filing deadline (including extensions) of the following year.

Q7: Does Roth contribution mean I pay taxes now?

A: Yes. Roth contributions are made with after-tax dollars. Your current taxable income is not reduced, but qualified withdrawals in retirement are tax-free.

Q8: What if I have significant business expenses? How does that affect my contributions?

A: High business expenses reduce your net earnings from self-employment, which in turn reduces your net adjusted self-employment income. This lowers the base amount upon which your Solo 401(k) contributions are calculated.