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Should You Open a Solo 401(k)? The Tax Strategy Most Business Owners Miss
- lisa9372
- Jul 1
- 3 min read
Updated: Jul 8
CPA, EA & Former Federal Auditor Lisa Marie Odeja Explains Whether You Should Open a Solo 401(k)
If you’re a real estate investor or business owner wondering whether you should open a Solo 401(k), you’re asking an important question. But it may not be the right first question.
The better question is whether a Solo 401(k) fits into your overall tax strategy. In this video, I explain who qualifies, how the 2026 contribution limits work, how age can affect your contribution limits, and why choosing the right retirement plan should always begin with thoughtful tax planning—not internet advice.
If you’d like to determine whether a Solo 401(k) or another retirement strategy is appropriate for your business, schedule a consultation using the link below.
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How a Solo 401(k) Fits Into Your Overall Tax Strategy
The difference is the strategy.
Many business owners begin by asking whether they should open a Solo 401(k). While that’s a common question, it often isn’t the best place to start.
The better question is whether a Solo 401(k) fits into your overall tax strategy. A retirement plan is simply one tool available to business owners, and choosing the right one depends on your business structure, compensation, cash flow, employees, and long-term financial goals.
In this video, I explain why tax strategy should come before choosing a retirement plan and walk through several examples showing how contribution limits can vary depending on your circumstances.
Who Qualifies for a Solo 401(k)?
A Solo 401(k) is generally designed for self-employed business owners who do not have qualifying full-time employees other than themselves and, in many cases, their spouse.
This often includes:
Sole proprietors
Single-member LLC owners
S corporation owners
Consultants
Contractors
Many real estate professionals
Eligibility depends on your individual facts and circumstances, so understanding the rules before opening a plan is important.
How Much Can You Contribute in 2026?
For many business owners, one of the biggest advantages of a Solo 401(k) is the opportunity to make both employee and employer contributions.
For 2026, eligible individuals may be able to contribute up to the regular IRS annual additions limit of $72,000, depending on compensation and business structure.
If you qualify for catch-up contributions because of your age, you may be able to contribute even more. However, not every business owner qualifies for the maximum contribution. Your allowable amount depends on your compensation, business structure, and how employer contributions are calculated.
Why Your Age Can Affect Your Contribution Limit
Age can also increase the amount you may be eligible to contribute.
For 2026:
Individuals ages 50 through 59 generally qualify for an additional $8,000 catch-up contribution.
Individuals ages 60 through 63 may qualify for an enhanced catch-up contribution of $11,250.
Individuals age 64 and older generally return to the standard $8,000 catch-up contribution.
These examples illustrate why retirement planning should always begin with your overall tax strategy rather than focusing only on contribution limits.
Why Tax Strategy Should Come Before Choosing a Retirement Plan
A Solo 401(k) can be an outstanding retirement and wealth-building tool, but it is not automatically the right solution for every business owner.
The objective isn’t simply to maximize retirement contributions. The goal is to determine how every available tax strategy works together based on your business, income, future goals, and long-term financial plans.
That’s why I encourage business owners to build the right tax strategy first and then select the retirement plan that best supports that strategy.
Ready to Build a Better Tax Strategy?
If you’re a real estate investor or profitable business owner and you’re unsure whether a Solo 401(k), or another retirement strategy, is appropriate for your situation, now may be a good time to review your options before another tax year passes.
If you’d like to discuss your goals and determine whether we’re a good fit to work together, schedule a consultation through my website. During our meeting, we’ll discuss your business, your objectives, and whether proactive tax planning can help reduce your tax liability while supporting your long-term financial goals.
Ready to Discuss Your Tax Strategy?
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