Freelance Developer at $180k Net: How to Stack a Solo 401(k)

Sample case: 1099 software engineer, single member LLC taxed as sole prop, $180,000 net Schedule C income for 2026, age 38, no spouse on payroll, marginal federal bracket 24%.

The math

Net SE earnings = $180,000 × 92.35% = $166,230. Employer profit-sharing share is 20% of that = $33,246. Add the full $23,500 employee deferral and the total Solo 401(k) contribution lands at $56,746. That is well under the $70,000 combined cap, so nothing gets clipped.

Tax saved

Treating it all as Traditional pre-tax: $56,746 × 24% federal = $13,619 of federal tax avoided this year. The contribution also drops the SE tax base slightly through the half-SE-tax deduction, but that piece is small and the calculator skips it.

Roth split decision

At a 24% marginal bracket the Roth-vs-Traditional question is genuinely close. Rule of thumb: if you expect retirement income above today's 22% bracket (about $100k joint), Roth wins. Below that, Traditional wins. A common compromise: $23,500 employee deferral all Roth, employer share Traditional (which is the default anyway).

Where the $13,250 of unused room sits

Combined cap minus actual contribution = $70,000 - $56,746 = $13,254 of unused room. To open it you would need to lift income (more clients), switch to S-corp where the 25% W-2 rule replaces the 20% SE rule, or wait until age 50 when the catch-up opens $7,500.

Why not just use a SEP IRA

SEP IRA gives the same $33,246 employer share but no $23,500 employee deferral and no Roth option. That is a $23,500 contribution shortfall every year, about $5,640 less in current-year tax savings, and a $271,000 retirement balance left on the table after 25 years at 7% real.