Solo 401(k) contributions have a combined ceiling of $72,000, but reaching it depends on two different contribution buckets. The employee bucket allows a flat $24,500 contribution without needing payroll calculations or business-structure elections. The employer bucket is more complex and depends on how the business is taxed. For an S-corp, the employer contribution is capped at 25% of W-2 salary. For an LLC that has not elected S-corp treatment, the cap is 20% of income, calculated after the deductible portion of self-employment tax. Misreading these rules can lead to underfunding or IRS overcontribution corrections.
"“You don't automatically get to put in an additional $47,500 to get to the $72,000. There's a calculation in place.”"
"“The employee bucket allows a flat $24,500 contribution regardless of business structure. As the host put it: ‘You get that $24,500 without really having to think about it.’ No payroll calculation, no S-corp election required, no CPA consult to lock it in.”"
"“For an S-corp, the employer contribution is capped at 25% of W-2 salary. For an LLC that hasn't elected S-corp treatment, the cap drops to 20% of income, calculated after the deductible portion of self-employment tax. The host's worked example: ‘If you do the $24,500 and then you pay yourself a $100,000 salary, you can do another $25,000.’”"
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