2026 Solo 401(k) Tax Benefits

Employee side

  • Contribute up to $24,500 of your own pay (pre tax or Roth).
  • If you’re 50+, add a $8,000 catch up (total $32,500).
  • Ages 60-63 may instead add $11,250, lifting the employee total to $35,750 (if the plan allows).
  • New for 2026: if your prior-year W-2 wages from the business were over $150,000, any catch-up contribution (the $8,000, or $11,250 at ages 60-63) must go in as Roth rather than pre-tax. This mostly affects S corp owners with high salaries; sole proprietors with no W-2 wages are generally not affected. We will flag which side you fall on.

Employer side

  • Your business can add a profit-sharing contribution of up to 25% of your compensation: for an S corp owner that means 25% of your W-2 wages; for a sole proprietor it works out to roughly 20% of net self-employment profit after the required adjustments. Employee plus employer dollars together cannot exceed the overall cap.

Overall cap

  • Employee and employer dollars together can’t exceed $72,000 for 2026.
  • With catch ups, the absolute maximum is $80,000 (or $83,250 if you’re 60-63).

Tax-deferred (or Roth) growth: Earnings compound without current taxation

Spouse advantage: If your spouse earns income from the business, there are additional benefits of opening a second participant account under the same plan.

However, keep in mind that the most a spouse can contribute as an employee is still limited to their total W2 wages, with a maximum contribution amount of $24,500 (assuming under the age of 50). In addition, the employer profit sharing contribution on behalf of the spouse will be based on the spouse’s W2 wages.

In addition, in order to employ a spouse, your spouse must be performing actual work for the business (e.g., administrative tasks, marketing, bookkeeping, scheduling) and should be paid reasonable (fair market value) wages/salary amount for the work performed. You should track the hours and maintain job descriptions, time records, etc. “Nominal” employment solely to make 401(K) contributions is not allowed.

Disclaimer: Educational account-opening steps only not personalized financial or legal advice and not a complete description of Solo 401(k) rules. Consult your own brokerage adviser before acting.

Step 1: Open your plan

Select a brokerage that supports one-participant 401(k)s (e.g., Fidelity, Vanguard, Schwab) and follow its online “Self-Employed 401(k)” setup flow.

Fidelity walkthrough: https://www.fidelity.com/retirement-ira/small-business/self-employed-401k/overview

Why it matters: This creates the plan document and the dedicated brokerage account where your contributions will be deposited.

Step 2: Contribute to your plan

Transfer funds from your business (or personal) account to the Solo 401(k) by the applicable deadlines (employee deferrals generally by 12/31; employer profit-sharing by the tax return deadline plus extensions).

Check with Doc Wealth to verify the amounts you may contribute each year based on income.

Step 3: Maintain your plan

  • Invest the cash however you prefer self direct into index funds, ETFs, etc., or hire an investment pro; the choice is entirely yours.
  • Review yearly to add new contributions or rebalance as needed.
  • Keep copies of your plan document and contribution records. A Form 5500-EZ is due each year once total assets across all your one-participant plans exceed $250,000 at year-end, and one final Form 5500-EZ is required in the year you close the plan regardless of size. Late filings carry penalties of $250 per day, so tell us when your balance approaches the threshold.

That’s it: open, contribute, maintain and enjoy the built in 2026 tax break. For full details or employee rules, see your contact brokerage for details.