How much 401K can I contribute with both W2 and 1099 income for 2025?
I've been working a corporate W2 job for the first part of the year and already contributed about $18,500 to my company 401K (they don't offer any matching sadly). Now I'm transitioning to freelance work and expect to pull in roughly $130k from my 1099 gigs for the second half of the year. I'm trying to maximize my retirement savings and wondering a few things: 1. Can I open a solo 401K for my freelance income even though I already contributed to my corporate 401K? 2. If yes, how much more can I contribute to the solo 401K? Can I do like 20% of my 1099 income? 3. What's the maximum limit for solo 401K contributions? 4. Is there any way to convert these to backdoor Roth contributions? Thanks for any help - trying to get everything set up before the end of year!
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StormChaser
Yes, you can absolutely open a solo 401k for your 1099 income even if you've already contributed to an employer 401k! The IRS treats these as separate "buckets" with different limits. The tricky part is understanding how the limits work. For 2025, your personal elective deferral limit is $23,000 total across ALL 401k plans. Since you already put $18,500 into your employer plan, you can only contribute another $4,500 as an employee contribution to your solo 401k. But here's where it gets better - as a self-employed person, you can also make "employer" contributions to your solo 401k of up to 20% of your net self-employment income (that's your 1099 income minus half your self-employment tax and the employer portion of your solo 401k contribution). With $130k in 1099 income, this could be around $20,000-25,000 additional contributions. So in total, you could probably put away another $25,000-30,000 into your solo 401k on top of what you've already saved.
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Dmitry Petrov
•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?
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StormChaser
•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.
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Ava Williams
I was in almost the exact same situation last year, and I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out my retirement contribution limits. I was super confused about the whole "employer" vs "employee" contribution thing with my solo 401k. The tool analyzed all my income sources and told me exactly how much I could contribute to each account. It even showed me how to optimize the employer contribution calculation for my solo 401k based on my specific income situation. Saved me from making some costly mistakes!
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Miguel Castro
•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.
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Zainab Ibrahim
•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?
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Ava Williams
•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.
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Miguel Castro
Just wanted to follow up about trying taxr.ai! I was skeptical at first, but it actually gave me a super detailed breakdown showing I could contribute about $7k more with a solo 401k vs a SEP IRA for my situation. The calculator showed exactly how the 20% "employer" contribution gets calculated after deducting half of self-employment tax. I was able to open my solo 401k last week and it even generated a personalized checklist for setting everything up correctly. Definitely made the process way easier than I expected!
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Connor O'Neill
If you're calling the IRS to verify any of this contribution limit stuff, good luck getting through! I spent 3 hours on hold last month trying to get someone to answer questions about my solo 401k situation. Finally I used Claimyr (https://claimyr.com) and got a callback from the IRS in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c They basically hold your place in line and call you when an agent is available. Completely changed my perspective on dealing with the IRS. I was able to confirm my specific contribution situation and get everything documented for my records.
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LunarEclipse
•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?
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Zainab Ibrahim
•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.
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Connor O'Neill
•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.
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Zainab Ibrahim
Just wanted to update that I actually tried the Claimyr service. I hate admitting when I'm wrong, but it actually worked exactly as described. Got a call back from an IRS agent in about 35 minutes after trying unsuccessfully on my own for over 2 hours the day before. The agent confirmed that with my W2 + 1099 situation, I needed to be careful about the overall $69,000 limit for 2025 (that's the combined employee+employer maximum across all 401k plans). This was crucial info for my tax planning that I couldn't get anywhere else. No security issues at all - they literally just held my place in line and connected me when an agent was available. Definitely using this again during tax season.
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Yara Khalil
One thing nobody's mentioned is that you need to open the solo 401k before December 31st if you want to contribute for this tax year! But you actually have until your tax filing deadline (including extensions) to make the contributions. Also, keep in mind the 20% employer contribution is based on your NET self-employment income, not gross. So after you deduct all your business expenses and half of self-employment tax.
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Sofia Gomez
•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?
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Yara Khalil
•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.
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Keisha Brown
Does anyone know if its better to max out HSA first or 401k? I have both W2 and 1099 income too and trying to figure out the optimal order.
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Paolo Esposito
•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.
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Mohammed Khan
Great question! I'm in a similar boat with mixed income sources. One thing I learned the hard way - make sure you calculate your net self-employment income correctly for that 20% employer contribution. Don't forget to subtract: 1. Half of your self-employment tax (roughly 7.65% of your net SE income) 2. The employer contribution itself (it's a circular calculation) So if you have $130k in 1099 income, after business deductions and the SE tax adjustment, your actual contribution base will be lower. The effective rate usually works out to about 18.6% rather than the full 20%. Also, since you mentioned backdoor Roth - consider whether a solo 401k with Roth options might be better than trying to do backdoor Roth IRA conversions, especially if your income puts you over the IRA contribution phase-out limits. The solo 401k gives you more flexibility and higher contribution limits.
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Mason Davis
•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.
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