Are There Roth Solo 401k Income Limits?

A Solo 401(k) is a retirement plan for self-employed individuals and small business owners with no employees other than a spouse. This plan allows for Roth contributions, where funds are deposited after taxes have been paid. Making Roth contributions allows for tax-free qualified distributions in retirement, which benefits those who expect to be in a similar or higher tax bracket later in life.

Direct Contribution Income Limits

A Solo 401(k) does not have the income-based limitations that prevent a business owner from making Roth contributions. This is a common point of confusion because Roth Individual Retirement Arrangements (IRAs) have strict income phase-outs. For 2025, a single filer’s ability to contribute to a Roth IRA phases out with a modified adjusted gross income (MAGI) between $150,000 and $165,000. For those married filing jointly, the phase-out range is $236,000 to $246,000.

The absence of these income restrictions is a primary benefit of the Solo 401(k). A high-income self-employed individual, who is barred from making direct Roth IRA contributions, can still contribute to a Roth Solo 401(k). This is possible because contributions are made in their capacity as an “employee” of their own business, which allows them to bypass the income caps associated with IRAs.

Understanding Contribution Types and Limits

Contributions to a Solo 401(k) are made from two distinct capacities: as the employee and as the employer, which allows for a substantial total contribution each year. As an “employee,” the business owner can make elective deferrals of up to $23,500 for 2025. These deferrals can be designated as either traditional pre-tax contributions, which reduce current taxable income, or as Roth post-tax contributions.

Individuals age 50 and over can make an additional catch-up contribution of $7,500, bringing their potential employee contribution to $31,000. A new provision for 2025 allows those aged 60 to 63 to make a larger catch-up contribution of $11,250, though not all plans may have adopted this feature.

As the “employer,” the business can make a profit-sharing contribution, which can be pre-tax or, if the plan allows, Roth. For an incorporated business, such as an S-Corporation, the employer can contribute up to 25% of the owner’s W-2 compensation. For a sole proprietorship, the contribution is based on up to 20% of net adjusted self-employment income.

Calculating Your Maximum Contribution

While there are separate limits for employee and employer contributions, they are also subject to a combined overall limit. For 2025, the total contributions from both sources cannot exceed $70,000, not including any age-based catch-up amounts. The maximum compensation that can be considered for calculating the employer portion of the contribution is $350,000 for 2025.

For a sole proprietor, the employer contribution is based on net adjusted self-employment income. This is calculated by taking gross income, subtracting business expenses, and then subtracting one-half of the self-employment taxes paid. The employer contribution is limited to 20% of this adjusted number. For instance, if a sole proprietor under age 50 has net adjusted self-employment income of $150,000, they could make a maximum employee Roth contribution of $23,500 and an employer contribution of $30,000, for a total of $53,500.

The calculation for an S-Corporation owner is based on their W-2 compensation, with the employer contribution limited to 25% of this amount. For example, an S-Corp owner under age 50 with a $100,000 W-2 salary could make the maximum employee Roth contribution of $23,500. The business could then contribute an additional $25,000 as an employer contribution, for a total of $48,500.