Solo 401(k) Contribution Limits and Strategy for Self-Employed Professionals

Employee elective deferral. For 2026, this is $24,500 ($32,500 at age 50 or older, $35,750 for ages 60-63). It is the same limit that applies to any 401(k) and is shared across all 401(k) plans an individual participates in during the year. It can generally be designated as either traditional (pre-tax) or Roth.

Employer profit-sharing contribution. This can add up to 25% of net self-employment earnings. For sole proprietors, the calculation uses net Schedule C income reduced by half of self-employment tax. For S-corp owners, the calculation is instead based on the W-2 compensation the S-corp pays the owner.

Combined total limit. The overall cap across employee deferral, employer contribution, and any after-tax contributions is $72,000 for 2026 ($80,000 with the age 50+ catch-up, up to $83,250 for ages 60-63). Because the employee deferral limit is shared across all 401(k) plans, a physician who already maxes out $24,500 at a W-2 job cannot make additional employee deferrals to a solo 401(k), but can still make the employer profit-sharing contribution based on net self-employment earnings from the 1099 side of their work (see the IRS announcement of 2026 retirement plan limits).

Participants age 50 or older can add an $8,000 catch-up to the employee deferral, bringing the employee total to $32,500. Under SECURE 2.0, participants ages 60-63 have an enhanced catch-up of $11,250, bringing their employee total to $35,750. The catch-up increases the employee deferral portion specifically; it does not separately increase the overall plan limit beyond what that higher deferral already contributes toward it, so the total plan limit with the age 50+ catch-up is $80,000, and $83,250 for ages 60-63.

One nuance to note for 2026: under SECURE 2.0, participants whose prior-year FICA wages exceeded $145,000 generally must designate catch-up contributions as Roth. This applies to W-2 employees, which includes S-corp owner-employees paying themselves a salary above that threshold, so an S-corp owner relying on the catch-up may need to make it as a Roth contribution rather than a traditional one (see the IRS announcement of 2026 retirement plan limits).

A SEP IRA offers an employer contribution only, up to 25% of net self-employment earnings, capped at $72,000 in 2026, with no employee deferral component and no Roth option. It is generally simpler to establish and maintain than a solo 401(k), but it is treated as a traditional IRA for purposes of the Backdoor Roth IRA pro-rata rule, which can complicate that separate strategy for anyone holding a SEP IRA balance.

A solo 401(k) combines an employee deferral of $24,500 with an employer contribution of up to 25%, together capped at $72,000, and it may also offer Roth and after-tax contribution options depending on the plan. Because 401(k) balances are generally excluded from the IRA pro-rata calculation, a solo 401(k) does not create the same complication for a Backdoor Roth IRA that a SEP IRA can.

At $100,000 of net self-employment income, a SEP IRA generally allows approximately $20,000 in contributions, while a solo 401(k) could allow roughly $42,500 ($24,500 employee deferral plus approximately $18,000 employer contribution). At $300,000 or more of net self-employment income, both plans may reach the $72,000 cap, but the solo 401(k) generally reaches that cap at a meaningfully lower income level. The trade-off is administration: a solo 401(k) requires a plan document and, once assets exceed $250,000, an annual filing, while a SEP IRA generally does not (see Ava Health's comparison of 1099 versus W-2 healthcare offers and Locums One's locum tenens tax guide). Our guide to locum tenens tax planning and guide to W-2 vs 1099 financial planning differences cover the broader tax context this decision sits within.

For self-employed physicians aged 45 and older with high, stable income, a cash balance plan can be layered on top of a solo 401(k) to further increase tax-deferred savings. Combined, the two plans may allow $150,000 to $340,000 or more in annual tax-deductible contributions, depending on age and income.

A cash balance plan requires actuarial certification and mandatory annual contributions within an actuarially calculated range, which makes this combined structure best suited to physicians with predictable cash flow who want to maximize tax-deferred savings rather than those with significant year-to-year income variability. Our guide to retirement planning for physicians who started saving late covers cash balance plans and catch-up strategies for physicians earlier in this decision in more detail (see the SDO CPA overview of physician retirement planning and PensionDeductions' guide to physician retirement plans).