Solo 401(k): Definition and 2026 Limits

On this page (6)

The numbers (tax year 2026)
How it adds up for a driver
Where you'll see this term
Common mix-ups
FAQ
Sources

A solo 401(k) (also called a one-participant 401(k)) is a 401(k) retirement plan for a business owner who has no employees. A driver who works as a sole proprietor can open one and contribute twice: once as the employee (an "elective deferral") and once as the employer. That double role is why it can allow more savings than a SEP IRA from the same profit.

The numbers (tax year 2026)

How it adds up for a driver

Take a fictional driver with $50,000 of Schedule C net profit. After the deduction for half of self-employment tax, net earnings are about $46,468. The employer part is 20% of that, about $9,294. Add an employee deferral of up to $24,500, and the total is about $33,794, well under the $72,000 cap. The deferral can't be more than your earnings, so at low profit the deferral is limited too. A SEP IRA at the same profit allows only the $9,294 employer part. Step-by-step math is on retirement savings for NYC drivers.

Where you'll see this term

At brokerages, often as "individual 401(k)" or "self-employed 401(k)."
In IRS Publication 560's deduction worksheet, which handles elective deferrals for self-employed plans.
On Form 8880 for the Saver's Credit: the employee deferral counts.

Common mix-ups

Not your old job's 401(k). If you also have a W-2 job with a 401(k), ask a preparer how the employee deferral limit applies across both plans.
Not a SEP IRA. A SEP has no employee deferral.
Roth option. Some solo 401(k) plans let you make the employee deferral as a designated Roth contribution; ask the provider.
Profit, not fares. Limits are based on net earnings after expenses and half of SE tax. Keep good records of your driving expenses so the numbers on your return, and your limits, are right.

Frequently asked questions

What is a solo 401(k)?

A 401(k) plan for a business owner with no employees. It is also called a one-participant 401(k). You contribute both as the employee and as the employer.

What are the 2026 limits?

Employee deferral up to $24,500 (plus $8,000 catch-up at 50+, or $11,250 at ages 60–63), and an employer contribution of up to 20% of net self-employment earnings for a sole proprietor. Together they can't exceed $72,000, not counting catch-up.

Is a solo 401(k) better than a SEP IRA?

From the same profit, a solo 401(k) usually allows more because of the employee deferral. It usually involves more paperwork. Which is better depends on your income and how much you want to save.

Does a solo 401(k) count for the Saver's Credit?

The employee deferral does. The IRS lists elective deferrals to a 401(k) among the contributions that qualify.

Sources

Last reviewed against the official sources on Oct 12, 2026.

Spotted something out of date? Tell us and we'll check it against the official source.

TLC Help is not a law firm and is not affiliated with the NYC Taxi & Limousine Commission or OATH. Explanations on this site are general information, not legal advice. Legal representation is provided by independent attorneys and OATH-registered representatives in our network.