Business Owner
intermediate · $50K - $100K
For self-employed with no employees (except spouse).
Contribute as both employee ($24,500) AND employer (25% of net earnings).
Total up to $72,000/year in 2026.
Can borrow from it unlike SEP IRA.
Roth option available.
Annual Limit
$72,000 ($80,000 if 50+, $83,250 if 60-63) - 2026
Key takeaways
- For the self-employed with no employees (besides a spouse), you contribute as both employee ($24,500) and employer (up to about 20-25% of net earnings).
- The 2026 total limit is $72,000 ($80,000 if 50+, $83,250 if 60-63).
- Unlike a SEP IRA, a Solo 401(k) can offer loans and a Roth option.
- The plan must be established by December 31, though contributions can be made until the tax filing deadline.
Solo 401(k) vs. SEP IRA
| Solo 401(k) | SEP IRA | |
|---|---|---|
| Contribution sources | Employee + employer | Employer only |
| Roth option | Often yes | No |
| Loans allowed | Often yes | No |
| Setup complexity | Moderate | Simple |
General mechanics, not a recommendation. Both suit self-employment income.
Requirements
- Self-employment income
- No full-time employees (except spouse)
- Must establish by December 31 of tax year
How to Implement
- 1Open a Solo 401(k) at a brokerage that offers one
- 2Contribute employee portion ($24,500 in 2026)
- 3Calculate and contribute employer portion (20-25% of net income)
- 4File Form 5500-EZ if balance exceeds $250,000
- 5Consider Roth option for tax-free growth
The bottom line
A Solo 401(k) offers more flexibility (Roth, loans, dual contributions) than a SEP IRA, at the cost of slightly more setup. Both let self-employed savers shelter substantial income.
Frequently Asked Questions
Featured Providers
- Fidelity
- Vanguard
- Schwab
Related business owner strategies
Sources
- Internal Revenue Service, Rev. Proc. 2025-32
2026 inflation-adjusted amounts (tax brackets, standard deduction, estate & gift, FSA, credits)
- Internal Revenue Service, Notice 2025-67
2026 retirement plan limits (401(k), IRA, SIMPLE, catch-up)
- Internal Revenue Service, Rev. Proc. 2025-19
2026 HSA and HDHP inflation-adjusted limits
Educational information only. Not financial, tax, or legal advice or a recommendation. Figures are drawn from the primary sources cited above; verify current amounts with the source before acting.