How to split Solo 401k contribution between Elective Deferral and Employer Contribution?

The way Solo 401k contributions work is actually pretty straightforward once you understand the two components: For Elective Deferrals (the employee portion), you can contribute up to $23,000 for 2025 plus $7,500 catch-up if you're over 50. This comes directly from your personal income. For Employer Contributions (the business portion), you can contribute up to 25% of your net self-employment income after deducting self-employment tax. With your $81,000 net income, the calculation would be roughly: 1. Calculate self-employment tax deduction: $81,000 × 0.9235 × 0.153 ÷ 2 = about $5,733 2. Adjusted net income: $81,000 - $5,733 = $75,267 3. Maximum employer contribution: $75,267 × 25% = about $18,817 So in your case, you could contribute $23,000 + $7,500 as elective deferrals and up to $18,817 as employer contribution. However, there's a total limit of $69,000 (for 2025, including catch-up) you can't exceed.

I had the exact same confusion with my Solo 401k last year. After hours of research, I found this amazing tool at https://taxr.ai that analyzed my business income and calculated the optimal split between elective deferral and employer contributions. It even ran multiple scenarios to maximize my tax savings! The system automatically identified that I was eligible for catch-up contributions and showed me exactly how much I could contribute in each category. It also explained the tax implications of each option and projected the long-term growth. Totally worth checking out if you're self-employed and dealing with retirement account calculations.

Just wanted to follow up on my question about taxr.ai. I decided to try it out, and I have to say I'm genuinely impressed. The tool correctly identified that I was making an error in my Solo 401k calculations all along! I was miscalculating my net income adjustment for the employer contribution portion, which meant I wasn't maximizing what I could contribute. The interface walked me through the exact formula the IRS uses, and now I understand exactly how to split my contributions. It even generated a report I can keep with my tax records explaining the calculations. Definitely recommend it for any self-employed person dealing with retirement planning.

If you're still having trouble reaching the IRS for clarification on your Solo 401k contribution split, I'd strongly recommend trying Claimyr (https://claimyr.com). I was stuck in the same Solo 401k calculation mess last month and needed official guidance since my CPA and I were interpreting the rules differently. After spending days trying to get through to the IRS, I found Claimyr, which got me connected to an IRS agent in less than 20 minutes! You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent walked me through the exact calculation method for determining my employer contribution limit and confirmed my elective deferral amount.

I have to eat my words about Claimyr. After posting my skeptical comment, I was still stuck with my Solo 401k contribution questions and desperate enough to try anything. I used the service yesterday, and to my complete surprise, I was connected to an IRS agent in about 25 minutes. The agent confirmed exactly how to calculate my maximum employer contribution (it's actually 25% of net earnings from self-employment AFTER subtracting the employer portion of self-employment tax and the employer retirement contribution itself - which creates a circular calculation). She also explained I could max out my elective deferral regardless of my income level. Would have taken me weeks to figure this out on my own, if ever.

Has anyone here used Vanguard for their Solo 401k? I'm trying to figure out if their system automatically helps you determine the correct split between employee and employer contributions or if you need to figure it out yourself beforehand.

Maybe a stupid question but do I need to make the employee and employer contributions at different times? Or can I do it all at once before the tax filing deadline? I always get confused about timing requirements for Solo 401k.

I was in the exact same boat last year trying to figure out my Solo 401k contributions! What finally helped me was understanding that the "circular calculation" for employer contributions is the tricky part. You can't just take 25% of your net self-employment income - you have to account for the fact that the employer contribution itself reduces the income it's calculated on. Here's the simplified approach I use: First, max out your employee elective deferral ($23,000 + $7,500 catch-up = $30,500 for you). Then for the employer portion, use this formula: (Net SE income - ½ SE tax) ÷ 1.25 = maximum employer contribution. With your $81,000 income, after subtracting half the SE tax (roughly $5,733), you'd have about $75,267. Divide that by 1.25 and you get approximately $60,214 as your maximum employer contribution. But since your total can't exceed $69,000 (including catch-up), and you're already using $30,500 for employee contributions, your employer contribution would be capped at $38,500. The key is keeping good records of which bucket each contribution goes into when you make them!

The confusion around Solo 401k contribution splits is totally understandable - I went through the same headache when I first started! One thing that helped me was realizing that you essentially wear two hats: employee and employer. As the "employee," you can defer up to $30,500 ($23,000 + $7,500 catch-up since you're over 50) from your personal income. This is money you're choosing not to take as salary. As the "employer," your business can contribute up to 25% of your compensation, but here's where it gets tricky - your "compensation" for this calculation is your net self-employment earnings minus half of your self-employment tax AND minus the employer contribution itself (hence the circular math everyone mentions). Given your $81,000 net income, you should be able to max out both portions without hitting the overall $69,000 limit. The key is making sure you designate each contribution properly when you make it - your plan administrator needs to know which bucket each dollar goes into for proper tax reporting. Have you checked if your plan administrator has any calculators or guidance? Some of the bigger providers have tools that can help with the math, even if they don't do it automatically.