How Much Can a Freelancer Contribute to a Solo 401(k) in 2025?

The Solo 401(k) is the most powerful retirement account available to freelancers. The contribution limits are generous, and understanding both contribution buckets — employee and employer — lets you shelter a significant portion of your self-employment income.

2025 Contribution Limits

Employee contribution (elective deferral):

• Under 50: $23,500
• 50 and older: $31,000 (includes $7,500 catch-up)

Employer contribution (profit sharing):

• Up to 25% of net self-employment income (after deducting half of SE tax)

Combined maximum:

• Under 50: $70,000
• 50 and older: $77,500

These limits apply per participant. If you and a spouse both have Solo 401(k)s (because both are self-employed), each of you can contribute up to the limit separately — nearly $140,000 combined in tax-advantaged retirement savings.

How to Calculate Your Maximum Contribution

Step 1: Calculate net self-employment income

Net SE income = Gross self-employment income − business expenses

Step 2: Deduct half of self-employment tax

SE tax = Net SE income × 92.35% × 15.3% Deductible half = SE tax ÷ 2

Adjusted SE income = Net SE income − (SE tax ÷ 2)

Step 3: Calculate employer contribution

Employer contribution = Adjusted SE income × 25%

(Actually 20% of net SE income is the effective rate because of the SE tax deduction — but using the formula above gives you the exact number.)

Step 4: Total contribution

Total = Employee contribution (up to $23,500) + Employer contribution

Example calculation:

• Freelance revenue: $120,000
• Business expenses: $15,000
• Net SE income: $105,000
• SE tax: $105,000 × 92.35% × 15.3% = $14,836
• Deductible half of SE tax: $7,418
• Adjusted SE income: $105,000 − $7,418 = $97,582
• Employer contribution: $97,582 × 25% = $24,396
• Employee contribution: $23,500 (max)
• Total contribution: $47,896

That’s $47,896 in tax-deferred retirement savings from $120,000 in revenue — a 39.9% contribution rate.

Employee vs. Employer Contributions: Key Differences

Employee contributions:

• Can be traditional (pre-tax) or Roth (after-tax)
• Must be elected by December 31 of the tax year
• Dollar limit applies regardless of income (as long as you have SE income)
• Come directly from your earnings

Employer contributions:

• Always traditional (pre-tax) — no Roth option for employer portion
• Can be made up until the tax filing deadline, including extensions (October 15)
• Based on a percentage of net SE income
• Come from business profits

The December 31 Deadline (Important)

The employee contribution election must be made by December 31 — even if you fund it later. If you wait until January and your plan document doesn’t already exist, you can only make employer contributions for the prior year.

Open your Solo 401(k) before December 31 if you haven’t already. Even if you can’t determine the exact contribution amount until you finalize your taxes, open the account and elect employee contributions. You can determine the employer contribution amount later.

Roth vs. Traditional in a Solo 401(k)

For the employee contribution, you choose:

Traditional (pre-tax): Reduces taxable income now. Best when you’re in a high tax bracket and expect lower income in retirement.

Roth (after-tax): No deduction now, but tax-free growth and withdrawals. Best when you’re in a lower bracket, or you want tax diversification.

Many freelancers benefit from splitting: traditional employer contributions (always pre-tax) plus Roth employee contributions in years when income is lower.

Where to Open a Solo 401(k)

Fidelity: Self-Employed 401(k) with no annual fees, excellent fund options, Roth option available. Best for most freelancers.

Vanguard: Individual 401(k) — also strong, slightly older interface.

Carry: Modern, mobile-first Solo 401(k) built specifically for self-employed people. Good if you want a purpose-built freelancer tool.

Avoid solo 401(k) plans with annual maintenance fees over $100. Fidelity and Vanguard are effectively free.

Contribute this year. The Solo 401(k) is the single most powerful tool for reducing a freelancer’s tax bill while building retirement wealth. Every dollar you contribute comes off your taxable income at your highest marginal rate.