Maximum Solo 401k contribution for self-employed with under 22k revenue? Solo 401k limits for low income side business?
Hey all, I could really use some tax advice! My husband is our main income provider with his full-time job, but I've been doing some freelance graphic design on the side. For 2025, I'm looking at earning about $9,300 in 1099 income. I've spent roughly $1,300 on software subscriptions, a new drawing tablet, and other stuff directly related to the business. I have a Solo 401k from when I was doing more freelance work a few years back, and I want to contribute as much as possible this year. I'm trying to figure out the max contribution I can make with this limited income. Option 1: Can I consider my entire $9,300 gross income for calculating the contribution limit without deducting my expenses? Option 2: Or do I need to subtract the $1,300 in expenses first, leaving only $8,000 for contribution calculations? Also, what's the tax difference between these approaches? If I'm understanding correctly, either way, the contribution would reduce our taxable income, right? I'm trying to maximize retirement savings while also being tax-smart.
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Dallas Villalobos
You need to use your net self-employment income (after expenses) when calculating Solo 401k contribution limits. This is because Solo 401k contribution limits are based on your net business profit, not gross income. For your situation, you'd need to subtract the $1,300 in business expenses from your $9,300 gross income, leaving you with $8,000 in net self-employment income. From this $8,000, you can make two types of contributions: 1. Employee contribution (elective deferral): Up to $22,500 in 2025 (or 100% of your compensation, whichever is less). In your case, this means up to $8,000. 2. Employer contribution (profit-sharing): Up to 25% of your net self-employment income after deducting the employer portion of self-employment tax. This calculation is a bit more complex. The total combined contribution can't exceed $66,000 for 2025.
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Reina Salazar
•So if I'm understanding right, she could contribute $8,000 as the employee contribution. But what about the employer portion? Is there a simple way to calculate that 25% of net income after SE tax deduction? Like a quick formula?
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Dallas Villalobos
•For a quick calculation of the employer contribution, you can use approximately 20% of your net self-employment income instead of the exact 25% (which requires more complex calculations with SE tax deductions). For the $8,000 net income, the employee contribution could be up to $8,000 (100% of your net income), and the employer contribution would be roughly $1,600 (using the 20% simplified calculation). So theoretically, you could contribute up to $9,600 total, but since that exceeds your net income, you'd be limited to $8,000 total.
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Saanvi Krishnaswami
I just wanted to share my experience using https://taxr.ai for figuring out my Solo 401k contributions last year. I had a similar situation with a side business (dog walking) bringing in about $12k with expenses around $2k. I was so confused about how to maximize my retirement contributions. What I love about taxr.ai is that you can upload your 1099s and expense records, and it calculates your exact Solo 401k contribution limits automatically. It shows you both the employee and employer contribution maximums based on your specific situation. Saved me hours of trying to do these calculations myself!
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Demi Lagos
•Does it handle situations where you also have a W-2 job with a 401k? I contribute to my employer's plan but also have a photography business on the side. Not sure how the limits work when you have both.
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Mason Lopez
•I'm a bit skeptical about these tax services. How accurate is it really? And does it actually save you money compared to just using something like TurboTax or H&R Block?
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Saanvi Krishnaswami
•For W-2 jobs with another 401k, the tool actually handles that perfectly. The $22,500 employee contribution limit applies across ALL your 401k accounts combined, so if you're already contributing to your employer's plan, it factors that in. However, the employer contribution portion for your Solo 401k is separate and not affected by your W-2 job's 401k. As for accuracy, I was skeptical too at first. What convinced me was that it found a calculation error I had been making for years. It's focused specifically on self-employment scenarios rather than being a general tax tool like TurboTax, which meant it caught details those broader tools missed for my specific situation.
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Mason Lopez
I tried taxr.ai after seeing it mentioned here, and I'm honestly shocked at how helpful it was. I was in a similar situation with my Etsy shop bringing in about $11k, and I had no idea how to properly calculate my Solo 401k limits. The tool showed me that I was eligible to contribute about $2,400 more than I thought! It breaks down the employee vs. employer contribution parts really clearly and even showed me how much I'd save in taxes with different contribution amounts. What I really appreciated was that it explained each calculation so I actually understood where the numbers came from, rather than just giving me a result to trust. Definitely using it again for 2025 taxes.
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Vera Visnjic
If you're having trouble reaching the IRS for clarification on Solo 401k contribution rules (which I definitely was), I'd recommend using https://claimyr.com to get through to an actual human at the IRS. I spent weeks trying to get someone on the phone about my specific contribution situation with my side business. With Claimyr, I got through to an IRS agent in about 20 minutes instead of waiting on hold for hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent was able to confirm exactly how I should calculate my limits with both W-2 income and 1099 income. Huge relief after all the conflicting advice I was getting online.
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Jake Sinclair
•How exactly does this work? I thought the IRS phone system was just permanently busy. Are they somehow jumping the queue or something?
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Brielle Johnson
•This sounds too good to be true. I've literally spent HOURS on hold with the IRS trying to sort out issues. If this actually works, it would be a game changer, but I'm not convinced any service can really get around the IRS's terrible phone system.
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Vera Visnjic
•The service works by continuously calling the IRS using their system until there's an open line, then connects you when they get through. It's not queue-jumping - they're essentially doing the hold time for you, and their system can make hundreds of calls per minute until one gets through. It's completely legitimate - they're just automating the frustrating process of repeatedly calling and getting busy signals. The IRS is actually aware these services exist and hasn't taken issue with them because you're still speaking directly with IRS agents through official channels. It's just eliminating the hold time headache.
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Brielle Johnson
Alright, I have to eat my words. After being super skeptical about Claimyr, I decided to try it because I was desperate to ask about my specific Solo 401k situation with mixed income sources. I got through to an IRS representative in about 15 minutes! The agent confirmed that I need to use my net business income for the Solo 401k calculations and explained exactly how the employer contribution part works with my specific numbers. She also clarified that my W-2 401k contributions do count toward my annual elective deferral limit, which was confusing me. Honestly, this saved me from potentially making a contribution error that could have caused headaches later. Never thought I'd be recommending an IRS call service, but here we are.
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Honorah King
One thing nobody's mentioned yet - don't forget about the self-employment tax implications. When you're deciding whether to take the full deduction for your business expenses or not, remember that reducing your net income also reduces your self-employment tax (which is currently 15.3% for 2025). So if you don't deduct your business expenses, you'd pay more in SE tax, which might offset some of the benefit of the higher 401k contribution. It's usually better tax-wise to take all legitimate business deductions and then calculate your Solo 401k contribution based on the lower net amount.
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Melina Haruko
•Thanks for bringing this up! I hadn't even thought about the self-employment tax angle. So if I deduct the $1,300 in expenses, I'd save on SE tax even though my potential 401k contribution would be lower. Do you know roughly how that math works out? Is the SE tax savings significant enough to make the lower contribution limit worthwhile?
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Honorah King
•The math typically favors taking all legitimate business deductions. On $1,300 of expenses, you'd save about $199 in self-employment tax (15.3% of $1,300) by deducting them. If you didn't deduct those expenses, you could contribute an extra $1,300 to your Solo 401k, which would save you income tax on that amount - but you'd still pay the extra $199 in SE tax. Unless you're in a very high income tax bracket, the SE tax savings plus income tax savings on the $1,300 business deduction will usually exceed the income tax savings on the additional $1,300 401k contribution.
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Oliver Brown
Don't overthink this! Just use the IRS formula: your contribution limit is lesser of $22,500 or your net earnings. And you ALWAYS wanna deduct business expenses. I made the mistake of not tracking my expenses properly when I started my side hustle and probably overpaid hundreds in taxes. Oh and btw the plan needs to be established by Dec 31st of the tax year, but you can actually make the contributions up until your tax filing deadline (including extensions). Super helpful if you're tight on cash at year end!
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Mary Bates
•But what about the employer contribution part? Doesn't that add more to the total you can put in? I thought solo 401ks let you contribute as both employer and employee.
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