The Solo 401(k) — also called the Individual 401(k) or Self-Employed 401(k) — is the most powerful retirement savings tool available to Florida sole proprietors, solo contractors, and single-member LLC owners with no employees. It allows both employee deferrals and employer contributions, enabling contributions up to $70,000 ($77,500 with catch-up) at lower income levels than a SEP-IRA. Here's everything Florida self-employed workers need to know about Solo 401(k)s in 2026.
The Solo 401(k) has two contribution components: (1) Employee elective deferral: up to $23,500 in 2026 ($31,000 if age 50+). This is limited to 100% of earned income. (2) Employer profit-sharing contribution: up to 25% of net self-employment income (after the SE deduction). Combined limit: $70,000 ($77,500 with catch-up) or 100% of compensation, whichever is less. Example: Florida consultant with $60,000 net SE income: Employee deferral $23,500 + Employer contribution $10,595 (20% of net SE income) = $34,095 total. Compare to SEP-IRA: $12,000 (20% of $60,000). Solo 401(k) wins for lower-income self-employed.
Most major custodians (Fidelity, Vanguard, Schwab, Vanguard) offer Roth Solo 401(k) elections for the employee deferral portion. Roth contributions go in after-tax but grow tax-free — withdrawals in retirement are tax-free. For Florida self-employed workers who expect to be in higher tax brackets in retirement, or who have accumulated large pre-tax accounts and want tax diversification, Roth Solo 401(k) contributions are a valuable tool. The employer profit-sharing portion remains pre-tax in most plans.
At lower income levels (under $100,000 net SE income), the Solo 401(k) typically allows larger contributions because of the employee deferral component. At higher income levels (above $280,000 net SE income), a SEP-IRA and Solo 401(k) converge at the $70,000 limit. The Solo 401(k) also offers: loan provision (borrow up to 50% of account balance up to $50,000), Roth option, and flexibility to maximize contributions at lower income. The SEP-IRA wins on simplicity — no plan documents required.
Solo 401(k) plan must be established by December 31 of the year for which you want to make contributions. Employer contributions can be made up to the tax return due date (including extensions). Steps: (1) Choose a custodian — Fidelity, Schwab, and TD Ameritrade offer free Solo 401(k)s with broad investment options; (2) Complete the custodian's plan adoption agreement; (3) Obtain a plan EIN from the IRS. Administration: Form 5500-EZ required when plan assets exceed $250,000. Below that threshold, no annual filing required. Much simpler than a traditional 401(k).
S-corp owner-employees can use a Solo 401(k) — contributions are based on W-2 wages, not net SE income. Employee deferral: up to $23,500 of W-2 wages. Employer profit-sharing: up to 25% of W-2 wages paid by the S-corp. The S-corp makes both contributions and deducts them on Form 1120-S. This is why maintaining a reasonable W-2 salary in an S-corp is important for maximizing retirement contributions — distributions cannot be used as the basis for 401(k) contributions.
$70,000 total ($23,500 employee deferral + up to 25% of compensation as employer profit-sharing), or $77,500 with catch-up contributions for those 50 and older.
Yes, but the plan must be established by December 31 of the tax year. Employer profit-sharing contributions can be made up to the extended filing deadline (October 15 for extended 2026 returns).
Employer profit-sharing contributions from the Solo 401(k) reduce net self-employment income, which reduces QBI. This slightly lowers the QBI deduction but may be net-positive when you factor in income tax savings from the larger contribution.
We help Florida self-employed workers maximize retirement contributions and reduce tax liability with Solo 401(k) planning.
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