Yes, self-employed 401(k) contributions are tax deductible when made on a traditional pre-tax basis. They come off your income as an above-the-line adjustment on Schedule 1 of Form 1040, reducing your adjusted gross income before you reach the standard or itemized deduction. As a self-employed business owner you wear two hats, employee and employer, and both types of contributions to a solo 401(k) are deductible so long as they are not designated Roth.1Internal Revenue Service. One-Participant 401(k) Plans
Where the Deduction Shows Up on Your Return
The employee portion is your elective deferral, taken from your compensation. The employer portion is a nonelective profit-sharing contribution, calculated as a percentage of your net self-employment earnings. Both flow to Schedule 1 (Form 1040), Part II, Line 16, the line for “Self-employed SEP, SIMPLE, and qualified plans.”2Internal Revenue Service. 2025 Schedule 1 (Form 1040) The total then reduces AGI on Form 1040, Line 10.
Because the deduction is above-the-line, it lowers AGI itself. That can pull you into a lower bracket, reduce net investment income tax exposure, and expand eligibility for credits that phase out at higher income levels. The authority for deducting employer contributions to a qualified plan is IRC Section 404(a).3Office of the Law Revision Counsel. 26 USC 404 – Deduction for Contributions of an Employer to an Employees Trust or Annuity Plan
What Is Not Deductible: Roth Contributions
Not every dollar going into a solo 401(k) reduces your current tax bill. If your plan allows Roth contributions, those elective deferrals are made with after-tax dollars and provide no deduction in the year you contribute. The trade is that qualified withdrawals in retirement come out tax-free, including all investment growth.
SECURE 2.0 added another layer starting in late 2022: employer nonelective contributions can be designated as Roth if the plan document permits it.4Internal Revenue Service. Choosing a Retirement Plan in a SECURE 2.0 World Making that election gives up the current-year deduction on the employer portion and includes it in your gross income now, reported on Form 1099-R for the year it’s allocated. You can keep employee deferrals pre-tax while sending employer contributions to Roth, or the other way around. Whatever amount you designate as Roth reduces the number you can write on Line 16.
How Much You Can Deduct in 2026
The IRS adjusts these ceilings for inflation. For 2026 the figures are:
- Elective deferral limit under age 50: $24,5005Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
- Standard catch-up at age 50 and older: $8,000, for a total deferral of $32,500
- Super catch-up at ages 60 through 63: $11,250, for a total deferral of $35,750
- Total annual additions (employee plus employer, before catch-up): $72,000, or 100% of earned income if less6Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted
- Annual compensation cap: $360,000. Only earnings up to this amount count when computing the employer contribution.
The 60-through-63 super catch-up is a SECURE 2.0 provision that took effect in 2025. Turn 64 and you drop back to the $8,000 catch-up. Catch-ups stack on top of the $72,000 base, so a 62-year-old with sufficient net earnings could contribute up to $83,250. Every dollar of those figures is deductible as long as it isn’t designated Roth.
One boundary worth flagging: the $24,500 employee deferral limit is a per-person cap across all 401(k) plans you participate in. If you also defer at a W-2 job, your solo 401(k) deferral has to fit inside what’s left of the annual limit.
Calculating Your Maximum Deductible Contribution
The employee deferral is straightforward: up to $24,500 (plus any catch-up) from your earnings. The employer profit-sharing piece is where self-employed math turns awkward, because the contribution itself reduces the compensation the contribution is based on.
The rule is 25% of net self-employment earnings, but “net earnings” for plan purposes means Schedule C profit minus half of your self-employment tax and minus the employer contribution you’re calculating. That circular reference is why the IRS uses an effective rate of 20% of net profit (after the SE tax deduction), rather than a true 25%.1Internal Revenue Service. One-Participant 401(k) Plans
A simplified example. Schedule C profit of $150,000, with a deductible half of SE tax of $10,597, gives adjusted net earnings of $139,403. The maximum employer contribution is roughly 20% of that, about $27,881. Add a $24,500 employee deferral and the deductible total is around $52,381. Age 50 or older pushes it higher through the catch-up. Publication 560 has a worksheet that walks through the exact arithmetic, and using it matters: even small rounding errors can create excess contributions.
If your business is an S-corporation or C-corporation, the calculation is simpler. The employer contribution is up to 25% of the W-2 wages you draw from the corporation. No circular adjustment is needed because your compensation is already a fixed payroll number.
Deadlines That Protect the Deduction
To claim the deduction for a given tax year, the plan must be established by specific deadlines that depend on entity type. Corporations and partnerships must adopt the plan document by December 31 of the tax year. Sole proprietors get more flexibility and can establish a new plan up to the tax-filing deadline (without extensions) and still make both employee deferrals and employer profit-sharing contributions for that year.1Internal Revenue Service. One-Participant 401(k) Plans
There is a catch for sole proprietors who set the plan up between the regular filing deadline and an extension deadline. In that window, only employer profit-sharing contributions are available for the establishment year. Employee deferrals for that year are off the table, because the deferral election must generally be made by year-end.
The funding deadline for both employee and employer contributions is the business’s tax-filing deadline, including extensions. File an extension to October 15 and you have until then to deposit the money and still take the deduction on the prior year’s return.
What Can Undo the Deduction
Excess employer contributions—amounts above the deductible limit under IRC Section 404—are subject to a 10% excise tax under IRC Section 4972, and that excise repeats every year the excess stays in the plan.7Office of the Law Revision Counsel. 26 USC 4972 – Tax on Nondeductible Contributions to Qualified Employer Plans The excess portion is nondeductible.
Excess elective deferrals have their own rulebook. If you go over the annual deferral limit, you must distribute the excess plus earnings by April 15 of the following year. Done on time, the excess is simply taxed as income in the year deferred. Miss April 15 and the excess is taxed in the year contributed and taxed again when eventually distributed, with no basis credit for the earlier tax.8Internal Revenue Service. Consequences to a Participant Who Makes Excess Deferrals to a 401(k) Plan Late distributions can also trigger the 10% early withdrawal penalty and mandatory 20% withholding.9Internal Revenue Service. 401(k) Plan Fix-It Guide – Elective Deferrals Werent Limited to the Amounts Under IRC Section 402(g)
The practical protection is running the Publication 560 worksheet before you write the check, then confirming your Line 16 figure matches what was actually funded by your filing deadline (including extensions), minus anything designated Roth.