Two-bucket contribution
Solo 401(k) lets you contribute as both employee and employer. Employee deferral up to the 401(k) limit (plus catch-up at age 50). Employer profit-sharing up to 25% of compensation (20% effective for self-employed). Combined limit equals the annual defined-contribution cap (over $69,000 in 2024, plus catch-up).
When solo 401(k) wins
For self-employed individuals earning less than ~$200,000, the solo 401(k) usually permits a larger total contribution than a SEP because the employee deferral is a flat dollar amount (not a percentage of compensation). At higher income, the two converge near the cap.
Roth solo 401(k)
Many solo 401(k) plans permit Roth elective deferrals. Unlike Roth IRAs, Roth 401(k) contributions have no income limit, so high earners can use the Roth solo 401(k) to fund tax-free retirement growth.
Deadlines
Plan must be adopted by year-end for elective deferrals to be made for that year. Under SECURE Act, the plan can be adopted as late as the extended return due date for prior-year employer profit-sharing contributions (but not deferrals).
When you can no longer use it
A solo 401(k) is for owner-only businesses. Once you have any non-spouse employee who works enough hours to be eligible, you must convert to a regular 401(k) plan with discrimination testing, Form 5500, and possibly safe-harbor contributions to all eligible employees.
Where this fits in the larger Schedule C picture
Schedule C has more than two dozen named expense lines plus an "Other expenses" catch-all. For most small businesses, four or five lines drive the bulk of the deduction total — vehicle, home office, depreciation, contract labor or wages, and supplies — and the remaining lines individually contribute small amounts that nevertheless add up. Treating each named line as a recurring decision rather than an afterthought, and revisiting the categories each January, often surfaces $2,000–$5,000 in additional legitimate deductions that a less disciplined process would have missed entirely.
Documentation that survives an exam
An IRS examination of this deduction will request three things: proof of payment (bank or card statement), proof of the underlying transaction (invoice or receipt), and proof of business purpose (a contemporaneous note or calendar entry). The first two are usually trivial to produce; the third is where most filers fall short. Capturing business purpose at the moment of the expense — a one-line note in your bookkeeping software or a category and memo on the receipt-capture app — converts a generic charge into a documented deduction that will withstand scrutiny three to six years later when memory has faded.