Eligibility

How much can I contribute to my Solo 401(k) if I have an S-Corporation?

You must make sure you are paid a salary in order to contribute to the Solo 401(k)

If you’ve elected S-Corp taxation for your business, you’re on your way to eligibility to use a Solo 401(k) to save for your retirement. First, you have to pay yourself a reasonable salary. Consult a local CPA or employment attorney to determine a reasonable salary in your market. From the salary, you can defer up to $19,500 for 2020 in employee salary deferrals. Employee salary deferrals are included as a payroll expense for the corporation. Additionally, the corporation can make an employer contribution to the Solo 401(k). The amount of the employer contribution is up to 25% of the employee’s salary, i.e. W-2 wages. The employer contribution is an expense to the corporation and gets reported on the corporation’s 1120-S tax return for the year in which the employer contribution is made.

What if I don't want to pay myself a salary or pay any payroll taxes?

We are sorry, but you currently are not eligible for the Solo K as you have no active, self-employed income. This is an essential part of Solo K new contributions. You need Self-Employed taxable income before you can defer taxable income or take advantage of a Roth Contribution. 

You can read more in our article about Solo 401(k) eligibility.