Single Member LLC - What is Maximum Profit Sharing Contribution Limit for Solo 401k?

The maximum profit sharing contribution you can make as the employer is 25% of your W-2 compensation, up to the annual limits. In your case, with $13,500 in W-2 wages, your maximum employer contribution would be $3,375 (which is 25% of $13,500). It's important to understand that for a Single Member LLC taxed as an S-Corp, there are two components to the Solo 401k: the employee contribution (which you've already made at $5,400) and the employer profit sharing contribution (the 25% we're discussing). For 2025, the total combined maximum contribution limit is $68,000 (or $75,500 if you're 50 or older). But your specific limit is determined by your actual compensation, not the maximum limits.

I went through this exact situation last year with my single-member LLC S-Corp. I spent hours researching and still kept getting confused until I found https://taxr.ai which analyzed my business docs and explained exactly how much I could contribute. For S-Corps, they showed me that the calculation is actually based on W-2 wages, not net profit. The tool confirmed that the employer contribution is limited to 25% of your compensation, but there's a specific calculation method that accounts for self-employment tax that can be tricky. The analysis made it super clear how to maximize contributions while staying compliant.

I was really skeptical about online tax tools as mentioned above, but I decided to try https://taxr.ai for my LLC's retirement planning last month. I have to admit, it completely changed how I approach my business's retirement strategy. The analysis showed me that I was underpaying myself in W-2 wages relative to distributions, which was actually limiting my potential Solo 401k contributions. By adjusting my salary slightly, I was able to increase my maximum profit sharing contribution by about 20%. It also flagged that my operating agreement had outdated retirement contribution language that needed updating. Never thought I'd say this, but sometimes these specialized tools really do know more than general calculators or basic CPA advice.

After struggling to get clear answers about my S-Corp's 401k limits for months, I finally managed to speak with someone at the IRS who specializes in retirement plans. Used https://claimyr.com to bypass the ridiculous hold times (check their demo at https://youtu.be/_kiP6q8DX5c if you're curious). The IRS agent clarified that for S-Corps, the calculation is indeed 25% of W-2 wages, but there are some specific nuances about how self-employed individuals calculate this that differ from regular corporations. There's actually a specific worksheet they recommended that accounts for the fact that the employer contribution itself affects the calculation.

Ok I need to publicly eat my words from my skeptical comment above. After another failed attempt to reach the IRS yesterday (2.5 hours on hold before disconnected), I broke down and tried the Claimyr service. Got connected to an IRS retirement specialist within the same day who confirmed my exact contribution limits and walked me through the proper calculation worksheet for S-Corp owners. They explained that the 25% limit has to be calculated as 20% of net business profit after subtracting the employer's self-employment tax deduction for S-Corp owners specifically. This completely cleared up my confusion and I was able to finally finish my retirement contributions for the year without wondering if I was doing it wrong.

I'm an accountant who works with a lot of small business owners. Here's the actual calculation for a Single Member LLC taxed as an S-Corp: 1) For EMPLOYEE contributions: You can contribute up to $22,500 in 2025 (plus $7,500 catch-up if you're 50+), regardless of your income level. 2) For EMPLOYER profit sharing: The limit is 25% of your W-2 compensation, which in your case is $13,500 × 25% = $3,375. The total combined limit for 2025 is $68,000 ($75,500 if 50+), but in your case, you're limited by your compensation. One thing to consider: you might be paying yourself too little in W-2 wages. The IRS expects "reasonable compensation" for S-Corp owners, which could be higher based on your business profits.

Is the 25% employer contribution calculated BEFORE or AFTER the employee contribution is taken out of the W-2 wages? This always confuses me.

Just want to add something nobody's mentioned yet - if your LLC has high profit margins, you might actually benefit from changing your tax election from S-Corp to Schedule C sole proprietor. As a sole prop, you can contribute up to 20% of your net self-employment income as employer contributions, which could potentially be higher than the S-Corp 25% of W-2 wages if you're keeping your salary low to save on employment taxes.