Are there IRS limits on solo 401(k) contributions for 2025?
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Yes, there are IRS limits on solo 401(k) contributions for 2025. A solo 401(k) (also known as an individual 401(k)) is a qualified retirement plan for self-employed individuals or business owners with no employees other than a spouse. The contribution limits for solo 401(k) plans are governed by the same rules as other 401(k) plans, but with special considerations for self-employed individuals.
2025 Solo 401(k) Contribution Limits
1. Elective Deferral Limit (Employee Contribution)
- For 2025, you may contribute up to $23,500 in elective deferrals (employee contributions) to your solo 401(k) plan.
- If you are age 50 or older by the end of 2025, you can make an additional catch-up contribution of $7,500, for a total elective deferral limit of $31,000.
- If you are age 60, 61, 62, or 63 in 2025, a higher catch-up contribution limit of $11,250 applies, making the total elective deferral limit $34,750 for those years.
2. Employer Contribution (Profit-Sharing)
- In addition to the elective deferral, the business can make a profit-sharing (employer) contribution of up to 25% of compensation.
- For self-employed individuals, "compensation" is your net earnings from self-employment, less half of your self-employment tax and the plan contributions you made for yourself. The calculation is more complex than for employees, and IRS worksheets should be used to determine the exact amount.
3. Overall Contribution Limit (Aggregate Limit)
- The total contributions to your solo 401(k) (employee deferrals plus employer contributions) cannot exceed $70,000 for 2025, or 100% of your compensation, whichever is less.
- If you are age 50 or older, the overall limit increases to $77,500, including the $7,500 catch-up contribution. If you are age 60, 61, 62, or 63, the overall limit increases to $81,250, including the $11,250 catch-up contribution.
4. Compensation Cap
- The maximum amount of compensation that can be considered for contribution purposes is $350,000 for 2025.
5. Deduction Limits
- Employer contributions are generally deductible up to 25% of the participant’s compensation (for self-employed individuals, this is effectively 20% of net earnings from self-employment after certain adjustments).
Summary Table for 2025 Solo 401(k) Limits
*For ages 60, 61, 62, or 63, the higher catch-up limit applies.
Additional Notes
- The solo 401(k) limits apply per individual, not per plan. If you participate in another employer’s 401(k), your total elective deferrals across all plans cannot exceed the annual limit.
- The overall limit includes both employee and employer contributions, but catch-up contributions are allowed on top of the overall limit if you are age 50 or older (or the higher catch-up for ages 60-63).
- Contributions must be made by the tax filing deadline, including extensions.
In summary: For 2025, the IRS limits solo 401(k) contributions to a maximum of $23,500 in elective deferrals ($31,000 if age 50+, $34,750 if age 60-63), plus up to 25% of compensation as an employer contribution, with a total cap of $70,000 ($77,500 or $81,250 with catch-up, depending on age), and a compensation cap of $350,000.
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