A Solo 401(k) Can Shelter Up to $72,000 of Your 2026 Business Income — Here's the Math

Most of the tax moves people chase in April are already closed by then. Retirement contributions are one of the few real levers you can still pull after the year ends — and if you’re self-employed with no employees, the Solo 401(k) is the biggest one on the board.

Here’s why it beats a plain IRA by a mile. In a Solo 401(k) you wear two hats: employee and employer. You get to contribute as both.

What you can actually put in for 2026

• As the employee, you can defer up to $24,500 of your pay.
• As the employer, you can add up to 25% of your compensation on top.
• Together those max out at $72,000 if you’re under 50.
• 50 to 59, or 64+? A catch-up adds $8,000, taking you to $80,000.
• 60 to 63? The bigger “super catch-up” adds $11,250, for $83,250.

Run it as a deduction. Put $30,000 into the plan and, in a 32% bracket, you’ve cut roughly $9,600 off your tax bill — for money that’s still yours, just sitting in your retirement account instead of the IRS’s. That’s the difference between a deduction that buys you something (a write-off on equipment you may not need) and one that simply moves your own money to your own side of the table.

SEP-IRA vs. Solo 401(k) — don’t default to the wrong one

A SEP-IRA has the same $72,000 ceiling, but it’s employer-only — capped at 25% of your compensation with no employee deferral. To hit the max you’d need to earn roughly $288,000. The Solo 401(k)‘s separate $24,500 employee bucket means you reach big numbers on far less income. For most one-person businesses, the Solo 401(k) wins. The SEP’s one edge is flexibility on timing, which brings up the part that trips people up.

The deadlines are not what you think

Two different clocks:

A SEP-IRA can be opened and funded as late as your extended filing deadline — into October — and still count for the prior year. Nothing has to be signed by December 31.

A Solo 401(k) is stricter on setup. The good news under the current rules: if you’re a sole proprietor with no employees, you can now adopt the plan as late as your April filing deadline and still make the employer (and, for sole proprietors, employee) contribution for the prior year. Incorporated? Then the plan generally has to exist by December 31 to capture employee deferrals — so if you’re an S-corp, this is a before-year-end decision, not an April one.

One more 2026 wrinkle worth flagging: if you take a W-2 from your S-corp and your prior-year wages topped $150,000, any catch-up contribution now has to go in as Roth (after-tax) rather than pre-tax. It doesn’t shrink what you can save — it changes which bucket it lands in. Annoying, but that’s the rule now, and it’s worth planning around.

This article is general information, not tax or investment advice. Contribution limits depend on your earned income, your entity, and your age — let's calculate your actual maximum before you fund a plan.