Solo 401(k)
A retirement plan for self-employed individuals and small business owners with no full-time employees, allowing both employee deferral and employer profit-sharing contributions.
Detailed Explanation
Total Solo 401(k) contributions for 2025 can reach $70,000 ($77,500 with the age 50+ catch-up of $7,500), combining: (1) employee elective deferral up to $23,500 ($31,000 with catch-up), and (2) employer profit-sharing of up to 25 percent of net self-employment earnings (or W-2 compensation for an S-Corp). Roth Solo 401(k) and after-tax non-Roth contributions enable mega-backdoor Roth strategies. Available to self-employed individuals, single-member LLCs, and S-Corp/C-Corp owner-only businesses. Spouses earning compensation from the same business can each maximize their own contributions, doubling the household limit.
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Learn about Tax Planning & StrategyRelated Terms
SEP-IRA
A simplified employee pension IRA allowing self-employed individuals and small business owners to contribute up to 25 percent of net earnings to a traditional IRA structure.
Backdoor Roth IRA
A two-step strategy of contributing to a non-deductible traditional IRA and converting it to Roth, used by high-income earners who exceed direct Roth IRA contribution limits.
Self-Employment Tax
The Social Security and Medicare tax (15.3% combined) paid by self-employed taxpayers on their net earnings from self-employment.
S Corporation
A pass-through tax election under Subchapter S of the Internal Revenue Code that avoids corporate double taxation while allowing shareholder-employees to reduce self-employment tax.
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