Solo 401k FAQ: Answers to Common Solo 401k Questions

The Solo 401k allows two types of contributions: salary deferrals and profit sharing contributions. The salary deferral is limited to $23,000 in 2024. The profit sharing contribution is limited to 20 to 25% of the business profit. The total contribution limit, including profit sharing, is limited to $69,000 a year as of 2024.

For those who are over 50 years old, a $7,500 catch-up contribution is allowed, bringing the maximum contribution to $76,500.

If your spouse also participates in the Solo 401k plan, he or she is also allowed to contribute up to the contribution limit. The same contribution limit rules apply.

For a corporation’s employee, salary-deferral contributions must be funded throughout the year. Typically, if the corporation uses a payroll service, the employee elective deferral is deducted from the employee’s paycheck.

For sole-proprietors, both employee and profit-sharing contributions can be made up to the tax filing deadline.

No, you are not required to make contributions to the Solo 401k every year. You can contribute as little as you want or even suspend contributions during difficult years. However, in order to keep the plan in compliance, substantial contributions are required from time to time.