Maximizing the Solo 401(k): new deadlines and tax benefits for solopreneurs
If you are a solopreneur, you are responsible for both your business’s current operations and your own future retirement. While many business owners start with a Traditional or Roth IRA, the Solo 401(k) — also known as an Individual 401(k) — offers significantly higher contribution limits and greater tax-planning flexibility.
Thanks to recent legislation under the SECURE Act 2.0, there is now more flexibility for business owners to set up these plans than ever before. Here is what you need to know about how these plans work and the specific deadlines for the current tax year.
What makes the Solo 401(k) unique?
The Solo 401(k) is designed for business owners who have no employees other than a spouse. Its primary advantage is that it allows you to contribute to your retirement in two different capacities:
As the Employee: You can defer up to 100% of your compensation, up to an annual limit ($24,500 for 2026).
As the Employer: You can make a "profit-sharing" contribution of up to 25% of your compensation (or roughly 20% of net self-employment income).
Combined, these contributions allow you to shield a significant portion of your income from taxes. In 2026, the total limit is $72,000, plus "catch-up" contributions if you are age 50 or older.
The SECURE Act 2.0 "retroactive" deadline
One of the most significant changes introduced by the SECURE Act 2.0 (Section 317) specifically benefits unincorporated solopreneurs and single-member LLCs.
Historically, if you wanted to make employee deferrals for a tax year, you had to establish your plan by December 31st. However, under the new rules, first-time Solo 401(k) adopters who are sole proprietors or single-member LLCs now have until their tax filing deadline (April 15th) to establish the plan and make retroactive employee contributions for the prior year.
Note: This special extension applies only to the first year you establish the plan. It allows you to look back at your previous year’s earnings and decide to open and fund a plan to lower that previous year's tax bill.
Tax advantages and catch-up changes
Beyond the deadline flexibility, the Solo 401(k) offers three primary ways to manage your tax liability:
Immediate tax deduction: Contributions made to a Traditional Solo 401(k) are "pre-tax," meaning they reduce your Adjusted Gross Income (AGI) dollar-for-dollar.
Roth flexibility: You can choose to make Roth contributions. These do not provide a tax break today but allow for tax-free withdrawals in retirement.
Catch-Up contributions for high earners: Beginning in 2026, a new SECURE Act rule requires participants who earned more than $150,000 in the prior year to make their "catch-up" contributions (for those 50+) on a Roth basis. While this removes the immediate tax deduction for the catch-up portion, it secures tax-free growth for those funds.
Moving toward financial security
Understanding these deadlines ensures you don't leave money on the table — or pay more in taxes than necessary. The Solo 401(k) is a highly effective tool for solopreneurs who want to simplify their retirement planning while maximizing their business's financial health.
