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2017 Solo 401k contribution limits

Solo 401k contribution limits typically increase by small amounts periodically, often every year or two. These increases are based on cost-of-living adjustments. For those of you looking to maximize tax savings on your upcoming filing, here are the 2017 Solo 401k contribution limits.

Under age 50:
For tax year 2017, a Solo 401k participant under 50 years of age can contribute up to $54,000 to his or her plan.

Solo 401k participants are able to put away so much each year because they are seen as serving two roles in their company, that of both the employee and the employer. In fact, there are separate “employee” and “employer” contribution pieces that make up the total contribution limit.

Let’s take a look at the example of someone under 50 years of age that can contribute up to $54,000, as mentioned above.

The “employee” elective deferral limit for this participant is $18,000 for 2017. That means this person could stash away 100% of the first 18,000 in income. The “employer” non-elective contribution (at times also referred to as the “profit-sharing contribution”) is made according to a percentage of the participant’s income up to the total limit. For plans adopted by corporations, that percentage is 25. For plans adopted by other entities such as LLCs and sole proprietorships, that percentage is 20.

Age 50 and older:
If the plan participant is 50 years of age or older in the contribution year, an additional catch-up contribution increases these limits. The 2017 catch-up contribution amount is $6,000. This makes the employee contribution limit $24,000 and the total contribution limit $60,000 for 2017.

Remember, these contribution limits apply to new money being put into the retirement account from earned income. Transfers and rollovers from existing retirement accounts do not count toward these contribution limits. There is no limit on the amount of funds that can go into a Solo 401k via an eligible transfer or rollover, such as from a traditional IRA or previous employer 401k.