How much 401K can I contribute with both W2 and 1099 income for 2025?

Wait I'm confused about the math here. If the limit is $23k across ALL 401ks, and OP already contributed $18,500, wouldn't they only be able to put in $4,500 more as employee contribution? Also, how does the backdoor Roth part work with solo 401ks?

You're absolutely right about the employee contribution limit, and I've corrected that in my response - thank you for catching it! The maximum employee contribution across all 401k plans is indeed $23,000 for 2025, so with $18,500 already contributed, only $4,500 remains for employee contributions to the solo 401k. As for backdoor Roth conversions with solo 401ks, it depends on the plan provider. Not all solo 401k providers offer Roth conversion options. You'll need to choose a provider that specifically allows for in-plan Roth conversions. Providers like Fidelity, Vanguard, and some others offer solo 401k plans with Roth conversion features. You'll make your contributions to the traditional solo 401k, then convert them to Roth, paying taxes on the converted amount.

Does it handle SEP IRAs too? I'm choosing between solo 401k and SEP IRA and not sure which would let me contribute more with similar income.

This sounds like an ad. How much does this service cost and is it really any better than just talking to a CPA who specializes in self-employment?

Yes, it absolutely handles SEP IRAs! It actually gives you side-by-side comparisons between different retirement account options (Solo 401k, SEP IRA, traditional IRA, etc.) based on your specific income situation, so you can see which one allows for the highest contribution limits. Super helpful for making that exact decision. The cost is actually really reasonable compared to multiple CPA consultations. While a good CPA is definitely valuable, I found taxr.ai gave me immediate answers to my specific questions without having to schedule appointments or wait for responses. I still use my accountant for complex tax planning, but for these specific retirement contribution questions, the tool was faster and gave me clear explanations I could reference anytime.

How exactly does this work? I don't understand how some service can magically get you to the front of the IRS queue when millions of people are calling?

This honestly sounds like a scam. There's no way some random service has special access to the IRS. What information do you have to provide them? I'd be super concerned about security.

It doesn't actually put you at the front of the line - it just automates the waiting process so you don't have to sit on hold. The service basically calls the IRS and navigates the phone tree for you, then stays on hold in your place. When an actual IRS agent picks up, Claimyr calls you and connects you directly to that agent. I was really careful about security too. You don't provide them with any sensitive tax information - all you give is your phone number so they can call you back when an IRS agent is on the line. You only discuss your actual tax details directly with the IRS agent after you're connected. I researched it pretty thoroughly before using it because I had the same concerns.

Thanks for mentioning the Dec 31 deadline! I had no idea and was thinking I could just set it up when I do my taxes next year. Do you have any recommendations for solo 401k providers that are easy to set up quickly?

For quick setup, I personally recommend Fidelity, E*TRADE, or Vanguard - all three have pretty streamlined processes for solo 401ks. Fidelity might be the fastest since their paperwork is relatively minimal, and they don't charge setup or maintenance fees. Their online interface is also user-friendly for managing contributions. If Roth conversion options are important to you, verify that feature specifically before opening an account as not all providers offer it. Some providers require additional paperwork for Roth options or employer contributions, so factor that into your timeline with the December 31st deadline approaching.

Generally HSA first! It's triple tax advantaged - tax deductible contributions, tax free growth, AND tax free withdrawals for medical expenses. It's the best deal in the tax code. Max that out before adding more to your 401k beyond any employer match.

This is super helpful! The circular calculation part is what's been confusing me. So if I understand correctly, you can't just take 20% of your gross 1099 income - you have to factor in that the employer contribution itself reduces the base you're calculating from? Is there a simple formula or should I just use one of those online calculators? I want to make sure I'm not over-contributing and getting hit with penalties.

You're exactly right about the circular calculation! Here's a simplified formula that works: Maximum employer contribution = (Net SE income × 0.20) ÷ 1.20 So if your net self-employment income (after business expenses and half of SE tax) is $120k: ($120,000 × 0.20) ÷ 1.20 = $20,000 The division by 1.20 accounts for the fact that the contribution itself reduces the compensation base. This usually works out to about 18.6% of your net SE income as Mohammed mentioned. I'd definitely recommend using the IRS worksheets in Publication 560 or a reliable online calculator to double-check your math. The penalties for over-contributing are steep (6% excise tax annually until corrected), so it's worth being conservative and verifying with a tax professional if you're unsure.

You're exactly right about the circular calculation! It can be tricky to wrap your head around. The simplified formula is: (Net SE Income - 1/2 SE Tax) × 0.20 / 1.20. The division by 1.20 accounts for the fact that the contribution itself reduces the contribution base. So with $130k gross 1099 income: - Net SE income after business expenses (let's say $125k) - Minus 1/2 SE tax (~$8,830) = $116,170 - Employer contribution = $116,170 × 0.20 / 1.20 = $19,362 I'd definitely recommend using an online calculator or tax software to double-check this - the IRS has worksheets in Publication 560 but they're pretty confusing. Over-contributing can result in a 6% excise tax each year until you fix it, so better to be conservative and verify with a professional if you're unsure!

@cbab9877e957 is spot on about the circular calculation! Here's a simplified formula that works well: Employer contribution = (Net SE income × 0.20) ÷ 1.20 So if your net SE income (after business expenses and half of SE tax) is $100k: - Employer contribution = ($100k × 0.20) ÷ 1.20 = $16,667 The 1.20 in the denominator accounts for the fact that you can't contribute more than you earn, so the contribution itself reduces the base. I'd still recommend using an online calculator or the taxr.ai tool others mentioned to double-check, especially since the SE tax calculation can get tricky. The IRS Form 1040 instructions have the exact worksheet too. Better safe than sorry with penalty avoidance!

Exactly! The circular calculation can be tricky. Here's a simplified formula that works: Net SE Income ÷ 1.1413 = Maximum employer contribution So for $130k in net self-employment income: $130,000 ÷ 1.1413 = roughly $113,900 maximum employer contribution The 1.1413 factor accounts for both the self-employment tax deduction (multiply by 0.9235) and the circular nature of the employer contribution calculation (divide by 1.2358, then multiply by 0.25 for the 25% rate, but since it's 20% for sole proprietors, you use different math). Actually, let me correct that - I made it more complicated than needed. For sole proprietors, the simpler approach is: (Net SE Income - (Net SE Income × 0.1413)) × 0.20 The 0.1413 factor is half of the 15.3% SE tax rate (since you deduct half), and then you take 20% of what remains. I'd definitely recommend using IRS Publication 560 or a reliable online calculator to double-check your math - the penalties for over-contributing are not fun to deal with!

Yes, exactly! The circular calculation is tricky. The simplified formula is: (Net SE Income - 1/2 SE Tax) × 0.20 ÷ 1.20. The division by 1.20 accounts for the fact that the contribution itself reduces the base. So if you have $100k net SE income after business expenses, subtract about $7,065 for half the SE tax = $92,935. Then: $92,935 × 0.20 ÷ 1.20 = $15,489 employer contribution. I'd definitely recommend using an online calculator or tax software to double-check this - the IRS has worksheets in Publication 560 but they're pretty confusing. Over-contributing can result in a 6% excise tax per year until you fix it, so better to be conservative and verify with a professional if you're unsure.

Exactly! The circular calculation can be tricky. Here's a simplified formula that works well: Maximum employer contribution = (Net SE Income × 0.20) ÷ 1.20 So if your net SE income (after business expenses and half of SE tax) is $120k: ($120,000 × 0.20) ÷ 1.20 = $20,000 This accounts for the fact that the contribution itself reduces the compensation base. The 1.20 in the denominator handles the circular math. But honestly, I'd recommend using a reliable online calculator or tax software to double-check, especially since the SE tax calculation can get complex. The IRS Publication 560 has worksheets too, but they're pretty dense. Better to be conservative than risk over-contributing!

Yes, exactly! The circular calculation is tricky. Here's a simplified approach: take your net self-employment income (after business expenses), multiply by 0.9235 (to account for the SE tax deduction), then multiply by 0.20. This gives you a close approximation. For example, if you have $100k net SE income: $100k × 0.9235 × 0.20 = $18,470 employer contribution. But honestly, I'd recommend using the official IRS worksheets in Publication 560 or one of the reputable online calculators to be absolutely sure. Over-contributing can trigger a 6% excise tax that compounds annually until you correct it, so it's worth getting this right! The IRS forms walk you through the exact calculation step by step.

@cbab9877e957 is absolutely right about the circular calculation! Here's a simplified way to think about it: The formula is: Net SE Income ÷ 1.2035 = Maximum employer contribution So for $130k in net self-employment income (after business expenses but before SE tax), it would be roughly: $130k ÷ 1.2035 ≈ $108k (contribution base) × 0.20 = ~$21,600 max employer contribution The 1.2035 factor accounts for both the SE tax adjustment (multiply by 0.9235) and the circular nature of the employer contribution calculation. Definitely use an online calculator or tax software to get the exact numbers though - the IRS has specific worksheets for this in Publication 560. Better safe than sorry with penalties!

Exactly! The circular calculation is tricky. Here's the simplified formula: For a 25% contribution rate (which applies to solo 401k), the effective rate is 20% (25% ÷ 1.25 = 20%). But then you also need to subtract half the SE tax first. So the steps are: 1. Net SE income = 1099 income - business expenses 2. SE tax = Net SE income × 92.35% × 15.3% 3. Adjusted net SE income = Net SE income - (SE tax ÷ 2) 4. Max employer contribution = Adjusted net SE income × 20% With your $130k example, you'd probably end up with around $24k-25k in employer contributions, not the full $26k (20% of $130k). I'd definitely recommend using an online calculator or tax software to double-check - the IRS has harsh penalties for over-contributions, and it's easy to mess up the math!

@cbab9877e957 is absolutely right about the circular calculation! Here's a simplified approach: take your net self-employment income (after business expenses), multiply by 0.9235 to account for the SE tax deduction, then multiply by 0.20 for the contribution rate. But since the contribution itself reduces the income base, the effective rate ends up being about 18.587%. So for rough planning: Net SE Income × 0.9235 × 0.20 ÷ 1.20 = your max employer contribution. I'd definitely recommend using a reliable online calculator or the worksheets in IRS Publication 560 to get the exact numbers. Over-contributing can trigger a 6% excise tax, so it's worth getting this right! The taxr.ai tool mentioned earlier in this thread actually handles this calculation automatically if you want to double-check your math.

Exactly right! The circular calculation is tricky. Here's a simplified formula that works for most people: **Employer contribution = (Net SE income × 0.9235) ÷ 1.2060** The 0.9235 factor accounts for the SE tax deduction, and dividing by 1.2060 handles the circular nature (since the contribution reduces its own base). So for rough planning: $130k gross → ~$99k net SE income → ~$20k max employer contribution. But honestly, I'd recommend using an online calculator or tax software to be safe. TurboTax, FreeTaxUSA, and most tax prep software handle this calculation automatically. The IRS also has worksheets in Publication 560 if you want to do it by hand. Better to be conservative and contribute slightly less than risk over-contributing and dealing with the 6% excess contribution penalty!

Exactly right! The circular calculation is tricky. Here's a simplified approach: Take your net self-employment income (after business expenses), multiply by 0.9235 to account for the SE tax deduction, then multiply by 0.20 to get your max employer contribution. But honestly, for accuracy I'd recommend using the IRS worksheets in Publication 560 or one of the online calculators that handles the circular math automatically. The penalty for over-contributing is 6% annually until you withdraw the excess, so definitely worth getting it right! Also, don't forget that your total contributions across ALL retirement accounts (employer 401k + solo 401k employee + solo 401k employer contributions) can't exceed the lesser of 100% of your compensation or the annual limits.

Yes, exactly! The circular calculation is tricky. Here's the simplified formula: Maximum employer contribution = (Net SE Income - 1/2 SE Tax) × 0.20 ÷ 1.20 The "÷ 1.20" part accounts for the circular nature since the contribution reduces its own base. So with $130k gross 1099 income: - Assume ~$125k after business expenses - Subtract ~$8,800 (half of SE tax) - Net base: ~$116,200 - Max employer contribution: $116,200 × 0.20 ÷ 1.20 = ~$19,367 I'd definitely recommend using an online calculator or the taxr.ai tool others mentioned to double-check. The IRS has strict rules about excess contributions, and the penalties aren't fun. Better to be conservative and confirm with a tax pro if you're unsure!

Yes, exactly! The circular calculation is tricky. Here's a simplified formula that works: For a 20% employer contribution, the effective rate is: Net SE Income × 0.20 ÷ 1.20 = actual contribution amount So if your net self-employment income (after business expenses and half SE tax) is $120k, your max employer contribution would be: $120k × 0.20 ÷ 1.20 = $20k But honestly, I'd recommend using the IRS worksheets in Publication 560 or one of the reputable online calculators to double-check. The penalty for over-contributing is 6% per year until you fix it, so definitely worth getting it right! Most solo 401k providers also have calculators on their websites that handle this math for you.

Exactly right! The circular calculation can be tricky. Here's a simplified formula that works: Maximum employer contribution = Net SE income × 0.186 This accounts for both the SE tax deduction and the circular nature of the calculation. So with $130k in 1099 income (assuming minimal business deductions), you'd be looking at roughly $24,180 in employer contributions. But honestly, I'd recommend using the IRS worksheets in Publication 560 or one of the online calculators from major brokerages like Fidelity or Vanguard - they handle all the circular math automatically and are less prone to errors. Over-contributing can result in 6% excise taxes, so it's worth double-checking your calculations! The IRS also has a worksheet specifically for this in Form 5305-SEP instructions that walks through the exact steps.

Exactly right! The circular calculation is tricky. Here's a simplified formula that works: Employer contribution = (Net SE Income × 0.20) ÷ 1.20 So if your net self-employment income (after business expenses and half of SE tax) is $120k, your employer contribution would be ($120k × 0.20) ÷ 1.20 = $20k. The reason for dividing by 1.20 is because you can't contribute based on income that includes the contribution itself - it creates that circular problem you mentioned. Honestly though, I'd recommend using the IRS worksheets in Publication 560 or one of the online calculators from major brokerages like Fidelity or Vanguard. They handle all the math automatically and reduce the risk of over-contributing. The penalties for excess contributions can be pretty steep, so better to be safe!

Exactly right! The circular calculation is tricky because the employer contribution reduces the compensation base it's calculated from. Here's the simplified formula: Employer contribution = (Net SE income × 0.20) ÷ 1.20 So for example, if your net SE income (after business expenses and half of SE tax) is $120k: - Employer contribution = ($120k × 0.20) ÷ 1.20 = $20k The 1.20 in the denominator accounts for the fact that you can't contribute based on the contribution itself. I'd definitely recommend using an online solo 401k calculator to double-check your math - the IRS penalties for over-contributing are no joke (6% excise tax per year until corrected). TaxAct and several other tax software providers have free calculators that handle this circular calculation correctly. Also keep in mind the overall limit - for 2025, total contributions to all your 401k plans can't exceed $69,000 (or $76,500 if you're 50+), so factor in what you've already contributed to your W2 employer's plan.