Do employee deferrals across jobs share one limit?

Yes. The elective deferral limit is a single combined cap across all of your 401(k) and 403(b) plans. If you max out at a W‑2 job, you generally cannot defer more salary into a solo 401(k), although you may still have employer contribution room.

Is the 25% employer rule based on net profit or adjusted compensation?

For self‑employed individuals, the 25% limit is applied to adjusted compensation, which is net self‑employment earnings reduced by the deductible portion of self‑employment tax. Using 92.35% of net earnings is a common shortcut to approximate this.

How are solo 401(k) limits different from SEP IRA limits?

A SEP IRA generally only allows employer contributions based on a percentage of compensation, while a solo 401(k) allows both employee deferrals and employer profit‑sharing contributions. That often results in more contribution room at lower income levels with a solo 401(k) than with a SEP.

Can I still contribute if my business has a loss?

Solo 401(k) contribution room is based on net self‑employment earnings. If your business shows a net loss for the year, you may not have eligible compensation to support contributions. In that case, talk with a tax professional before contributing.

What happens if I accidentally exceed the limits?

Excess contributions can trigger additional taxes and require corrective distributions. If you think you may have over‑contributed, contact your plan provider and tax advisor as soon as possible to correct the error within IRS deadlines.

Is this calculator giving tax or legal advice?

No. It provides a simplified planning estimate based on common solo 401(k) rules. Your actual limits depend on your full tax situation, business structure, and current IRS guidance, so always confirm with a qualified tax or retirement professional.

finance calculator

Solo 401(k) Contribution Calculator

Estimate maximum solo 401(k) employee and employer contributions based on net self-employment income.

Results

Compensation for employer calc: $73,880
Employer contribution: $18,470
Employee contribution (incl. catch-up): $23,000
Total contribution: $41,470

Overview

A solo 401(k) lets self‑employed people and very small business owners contribute both as the “employee” and the “employer.” That dual role is powerful, but it also makes the math confusing—especially once you factor in the 92.35% self‑employment adjustment, the 25% employer rule of thumb, and the annual IRS limits that can change every year. This calculator walks you through those moving parts so you can quickly estimate how much room you have for employee deferrals, employer profit‑sharing contributions, and total solo 401(k) contributions based on your net self‑employment income.

How to use this calculator

Enter your estimated net self‑employment earnings for the year after business expenses. If your income fluctuates, use a realistic estimate rather than an optimistic best case.
Enter the employee deferral amount you plan to send into your solo 401(k). This can be any number up to the current IRS salary deferral limit for the year.
Enter your age so the calculator can determine whether you are eligible for catch‑up contributions (typically available starting in the year you turn 50).
Adjust the catch‑up contribution field if you are 50 or older and plan to take advantage of that extra room. If you are under 50, you can leave this field at zero or ignore it.
Review the calculated compensation for employer contributions (net earnings × 92.35%) and the resulting employer contribution using the 25% rule of thumb.
Look at the employee contribution (deferral plus any catch‑up) and the total contribution amount, and compare that total to the current combined limit you are targeting for the tax year.

Inputs explained

Net earnings: Your net self‑employment income after deductible business expenses, before the self‑employment tax deduction. This is typically your Schedule C net profit for sole proprietors.
Employee deferral: The amount you choose to contribute as the employee portion of your solo 401(k). Employee deferrals across all 401(k) and 403(b) plans share one combined IRS limit each year.
Age: Your age at year‑end, used to determine whether you qualify for catch‑up contributions. Most plans allow catch‑up in the calendar year you turn 50.
Catch-up: Additional elective deferral for participants age 50 or older. This sits on top of the standard deferral limit but still counts as an employee contribution, not employer profit sharing.

How it works

You start by entering your net self‑employment earnings, which is your business profit after deductible expenses but before taking the self‑employment tax deduction. This is the same net figure that flows to your Schedule C if you file as a sole proprietor.

For self‑employed folks, IRS rules require an adjustment when calculating compensation for the employer contribution. Instead of using 100% of net profit, you use approximately 92.35% of net earnings to account for the deductible portion of self‑employment tax.

The calculator multiplies your net earnings by 92.35% to estimate this adjusted compensation base. This is a standard shortcut that mirrors IRS worksheets used in many solo 401(k) guides.

Next, it applies the employer contribution rate. Many solo 401(k) plans allow an employer contribution of up to 25% of that adjusted compensation (for corporations) or effectively 20% of net earnings for sole proprietors after the SE tax adjustment. Here, we focus on the 25% of adjusted compensation rule for simplicity.

In parallel, you enter your planned employee deferral. This is the elective amount you choose to contribute out of your compensation, up to the annual IRS salary deferral limit. If you are age 50 or older, you may also be eligible for a catch‑up contribution that sits on top of the standard deferral limit.

The calculator adds your employee deferral and any catch‑up amount (if your age input is 50 or higher) to determine your total employee contribution. It then combines the employee and employer portions to compute a preliminary total contribution.

Finally, the total is compared conceptually to the annual overall plan limit (the combined employer + employee cap for the year). While the exact dollar limits change over time and can vary by tax year, the calculator is designed so you can update your deferral and catch‑up values as IRS guidance evolves and quickly see whether your planned contributions are in a reasonable range.

Because many self‑employed people also have access to a 401(k) at a W‑2 job, the tool also assumes that employee deferrals across all plans share the same global limit. That means if you max out deferrals at a day job, your solo 401(k) employee deferral room may be limited even though you can still make employer contributions from your self‑employment income.

Formula

Compensation for employer contribution ≈ Net self‑employment earnings × 0.9235
Employer contribution ≈ Compensation × 25% (subject to annual limits)
Employee contribution = Employee deferral + Catch‑up (if age ≥ 50)
Total contribution = Employer contribution + Employee contribution
Total must not exceed the combined annual limit for your tax year

When to use it

A full‑time freelancer wants to know how much they can save in a solo 401(k) if they earn $80,000 of net profit and are contributing only to this plan.
A consultant with both W‑2 income and side‑business income wants to see how much additional employer contribution room is available in a solo 401(k) after maxing out deferrals at a day job.
A self‑employed professional age 52 is trying to understand how catch‑up contributions change their maximum solo 401(k) contribution compared with prior years.
A small business owner is modeling the trade‑off between taking more income as wages versus leaving profits in the business, in order to maximize tax‑advantaged retirement contributions.

Tips & cautions

Remember that employee salary deferrals are shared across all 401(k) and 403(b) plans. If you already max out deferrals at a W‑2 job, your solo 401(k) employee deferral room may be zero even if you still have employer contribution capacity.
Plan limits change over time. Make a habit of updating the default deferral, catch‑up, and combined limit numbers each tax year when the IRS releases new guidance.
If your self‑employment income is volatile, consider modeling both conservative and aggressive scenarios to avoid accidentally over‑contributing and triggering excess contribution corrections.
Coordinate with your tax professional when you have multiple business entities or complex ownership structures, since controlled‑group rules can affect how contribution limits apply.
This calculator assumes a straightforward self‑employed setup and does not model detailed IRS worksheets for all entity types or edge cases.
We use the common 92.35% adjustment to approximate compensation for the employer contribution. Actual calculations may vary slightly once you compute your final self‑employment tax.
The 25% employer contribution rule is simplified. Sole proprietors often reference an effective 20% of net earnings limit once all adjustments are layered in.
The tool does not track or enforce exact dollar caps for each tax year; you must still ensure your planned contributions stay within the current IRS limits for employee deferrals, catch‑up contributions, and total employer + employee contributions.
It does not attempt to handle controlled‑group rules, multiple solo 401(k) plans, or coordination with defined benefit/cash balance plans.

Worked examples

$80,000 net earnings, age 35, full employee deferral

Start with net self‑employment earnings of $80,000.
Compute compensation for employer contribution: $80,000 × 0.9235 ≈ $73,880.
Employer contribution at 25% of compensation: $73,880 × 0.25 ≈ $18,470.
Assume you contribute the full standard employee deferral (for example, $23,000) and are under 50 so no catch‑up applies.
Total contribution ≈ $18,470 employer + $23,000 employee = $41,470, subject to the overall annual solo 401(k) cap.

$120,000 net earnings, age 52, full deferral plus catch‑up

Net self‑employment earnings are $120,000.
Compensation for employer contribution ≈ $120,000 × 0.9235 ≈ $110,820.
Employer contribution at 25% ≈ $110,820 × 0.25 ≈ $27,705.
Assume you contribute the full employee deferral (for example, $23,000) plus a $7,500 catch‑up contribution because you are over 50.
Employee contribution = $23,000 + $7,500 = $30,500.
Total solo 401(k) contribution ≈ $27,705 + $30,500 ≈ $58,205, provided this remains under the combined annual limit for the year.

Side‑hustle solo 401(k) with W‑2 401(k) already maxed

Assume you already contributed the full annual employee deferral at your W‑2 job.
You earn $40,000 of net self‑employment income from a consulting side business.
Compensation for employer contribution ≈ $40,000 × 0.9235 ≈ $36,940.
Employer contribution at 25% ≈ $36,940 × 0.25 ≈ $9,235.
Because your employee deferral limit is already used at the day job, your solo 401(k) employee deferral is effectively $0.
You can still contribute roughly $9,235 as an employer profit‑sharing contribution from your side business, subject to the overall annual cap.

Deep dive

Use this solo 401(k) contribution calculator to estimate how much you can contribute as both the employee and the employer based on your net self‑employment income. By applying the 92.35% self‑employment adjustment and the common 25% employer rule, it gives you a realistic view of your employer profit‑sharing room without forcing you to wade through IRS worksheets.

The tool is especially useful for freelancers, contractors, and small business owners who want to know whether a solo 401(k) can help them save more than an IRA alone. You can experiment with different net income levels, employee deferral amounts, and ages to see how catch‑up contributions and higher profits expand your contribution space over time.

Because employee deferrals across jobs share a single IRS limit, the calculator also helps people who have both W‑2 and self‑employment income think through how to split their contributions. You can model the impact of maxing out at a day job versus reserving some deferral room for your solo 401(k) while still taking advantage of employer contributions from your business.

FAQs

Do employee deferrals across jobs share one limit?: Yes. The elective deferral limit is a single combined cap across all of your 401(k) and 403(b) plans. If you max out at a W‑2 job, you generally cannot defer more salary into a solo 401(k), although you may still have employer contribution room.
Is the 25% employer rule based on net profit or adjusted compensation?: For self‑employed individuals, the 25% limit is applied to adjusted compensation, which is net self‑employment earnings reduced by the deductible portion of self‑employment tax. Using 92.35% of net earnings is a common shortcut to approximate this.
How are solo 401(k) limits different from SEP IRA limits?: A SEP IRA generally only allows employer contributions based on a percentage of compensation, while a solo 401(k) allows both employee deferrals and employer profit‑sharing contributions. That often results in more contribution room at lower income levels with a solo 401(k) than with a SEP.
Can I still contribute if my business has a loss?: Solo 401(k) contribution room is based on net self‑employment earnings. If your business shows a net loss for the year, you may not have eligible compensation to support contributions. In that case, talk with a tax professional before contributing.
What happens if I accidentally exceed the limits?: Excess contributions can trigger additional taxes and require corrective distributions. If you think you may have over‑contributed, contact your plan provider and tax advisor as soon as possible to correct the error within IRS deadlines.
Is this calculator giving tax or legal advice?: No. It provides a simplified planning estimate based on common solo 401(k) rules. Your actual limits depend on your full tax situation, business structure, and current IRS guidance, so always confirm with a qualified tax or retirement professional.

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This solo 401(k) contribution calculator is for educational planning only. It uses simplified formulas for compensation and employer limits and does not incorporate every IRS rule, tax‑year update, or business structure nuance. Always verify your contribution strategy and limits with a tax professional, retirement plan specialist, or financial advisor before making final decisions.