Two contributions, one account
The employee side lets you defer income directly; the employer side is a profit-sharing contribution of up to 20% of your adjusted net earnings — together they let a solo business owner shelter far more than a regular IRA allows. Deciding between pre-tax and Roth? See the Roth vs Traditional Calculator, or 401(k) Calculator to project growth.
Frequently asked questions
Why 92.35% of net profit?
Self-employment tax applies to 92.35% of your net profit, not the full amount — a long-standing IRS adjustment that mirrors how an employer's share of payroll tax isn't counted as the employee's income.
Can I really contribute both as employee and employer?
Yes — a solo 401(k) is one plan, but IRS rules let a self-employed person make an "employee" salary-deferral contribution and an "employer" profit-sharing contribution to it, which is what lets total contributions run well above a regular IRA.
What if I also have a job with a 401(k)?
The employee-deferral limit is shared across every 401(k) you contribute to in a year, including a W-2 employer's plan. The employer/profit-sharing portion of a solo 401(k) is separate and not shared.
Last updated: June 2026