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The biggest personal finance win for anyone with self-employment income: Setting up a Solo 401k.

This is the most powerful retirement account in America if you know how to use it to its full potential.

It allows you to:

• Contribute up to $70,000 per year, per spouse
• Take the entire amount as a tax deduction, or funnel it into your Roth IRA or a combination thereof
• Invest the dollars in virtually any asset with no taxes while it compounds
• Borrow up to $50,000 from your Solo 401k if you ever need short-term liquidity
• Get a tax credit for setting one up </aside>

Table of Contents

Eligibility

Most people are eligible to set up a Solo 401k if they have any self-employment income.

This could be a full-fledged business with no external employees or something as simple as earning a few dollars a year for posting on social media.

Here are the official criteria for Solo 401k eligibility:

• Self-Employment or Business Owner Income

  This can be income you make as a solo business owner — or if you have a full-time W-2 job, any money you make on the side. Rental income, or income from capital gains do not count, but typically most other types of income will make you eligible.

  You do NOT need a “business” to qualify for a Solo 401k. You can make money under your SSN and still qualify. However, you need to have NET income for the year.

• No Full-Time Employees

  You cannot have any full-time employees excluding your spouse or any other co-owners of the business. You can have any number of 1099 employees or contractors without affecting your eligibility.

  Even though it’s called a “Solo 401k”, you technically do not have to be a solo business owner!

  You can have multiple owners of a business, all of whom are allowed to set up their own Solo 401k. Any spouses that work on the business can also set up their own Solo 401k.

With that said, here are some important edge cases to consider:

What if you own multiple businesses?

If you fully own multiple businesses, you typically cannot have full-time W-2 employees at ANY business to be eligible for a Solo 401k.

All businesses with the same ownership are considered a “controlled group” and typically need at least 20% or more of the ownership to not overlap to remain eligible.

(Note: In some cases, even if ownership doesn’t overlap, the affiliated service group rules can still apply — especially for professional service businesses like medical practices, law firms, or consultancies that share resources, clients, or management. The IRS may treat those entities as a single employer for retirement plan purposes.)

If there are multiple permutations of owners, it gets a little trickier to calculate controlled group thresholds. I recommend reading this article on controlled group rules or checking with a tax professional.

What if you have part-time employees?

You can have any number of 1099 contractors and not affect your eligibility. However, if you have part-time W-2 employees, it gets a little more nuanced.