As a self-employed business owner, you wear two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. An owner can contribute both:
Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit:
$22,500 in 2023 ($20,500 in 2022; $19,500 in 2020 and 2021), or $30,000 in 2023 ($27,000 in 2022; $26,000 in 2020 and 2021) if age 50 or over; plus
Employer nonelective contributions up to:
25% of compensation as defined by the plan, or
for self-employed individuals - This compensation doesn’t include retirement plan contributions or self-employment tax, which are deducted from your income. TurboTax will make these calculations for you (or tell you if you contributed too much to your Solo 401(k)).