What is the maximum contribution for a Solo 401k in 2026?

Okay, let's break down the 2026 Solo 401(k) contribution limits. It's a powerful retirement savings tool for the self-employed!

Here's what you need to know:

* **Two Parts to the Contribution:** A Solo 401(k) lets you contribute in *two* roles: as the employee *and* as the employer. This is what allows for higher contribution limits.

* **Employee Contribution (Elective Deferral):** In 2026, this limit will be **$23,000**. This is the amount *you* decide to contribute from your income.

* **Employer Contribution:** As the business owner (employer), you can contribute up to **25% of your adjusted self-employment income**.

* **Combined Maximum:** The *total* contribution (employee + employer) **cannot exceed $69,000** in 2026.

* **Catch-Up Contribution (Age 50+):** If you're age 50 or older in 2026, you can contribute an *additional* $7,500 as an elective deferral, bringing your employee contribution limit to $30,500. The total combined maximum still remains $69,000.

**Example:**

Let's say you're 40 years old and have $80,000 in adjusted self-employment income in 2026.

* **Employee Contribution:** You contribute the maximum $23,000.

* **Employer Contribution (25% of $80,000):** $20,000.

* **Total Contribution:** $43,000 (well below the $69,000 limit).

Now, let's say you're 55 years old and have the same $80,000 income.

* **Employee Contribution:** $30,500 ($23,000 + $7,500 catch-up).

* **Employer Contribution (25% of $80,000):** $20,000.

* **Total Contribution:** $50,500.

**Important Notes:**

* **Adjusted Self-Employment Income:** This is your net earnings *after* deducting one-half of your self-employment tax and any contributions made for self-employment tax purposes.

* **Traditional vs. Roth:** You can choose between a Traditional (tax-deductible contributions, taxed withdrawals in retirement) or Roth (after-tax contributions, tax-free withdrawals in retirement) Solo 401(k).

* **Plan Document:** You *must* adopt a formal Solo 401(k) plan document.

⚠️ Disclaimer: This is for educational purposes only. Always consult a licensed CPA for personalized advice.