How much can you contribute every year to the i401k?
Updated Jan 19, 2025
We can put nearly 3x the money into an i401k compared to staffers with a regular 401k.
The exact amount depends on how much you earn — it does get a bit wonky here, but hang in there, you’ll get it.
Total contribution limit of the i401k in 2025
$70,000 up to age 49
$77,500 for age 50+
$81,250 age 60-63
(In comparison, a staff or government employee can only contribute $23,500. Over 50+ $31,000 )
Remember, you are the employer and the employee with an i401k, so you add your contribution plus what your company can put in.
Employee (you) contribution limit per year
$23,500 in 2025 up to age 49
$31,000 in 2025 if you’re 50 and over
$34,750 if you’re 60-63.
If you have a 401k with a staff job and will have an i401k with your freelance biz, the employee limit is shared among all 401ks you have.
Employer contribution limit per year (that’s you again, you’re the employer)
Up to 25% if your company pays you through a payroll. This is usually the case if you are an S-Corp.
If you are Self-Employed, not an S-Corp
If you’re a Sole Proprietor or LLC and don’t pay yourself a salary through payroll, you have to calculate how much your business can contribute to the i401k. It ends up around 20%. Financial Advisor Mike Piper comes to the rescue with his excellent calculator.
Or use IRS Publication 560, which is the IRS going nutso with their crazy worksheets. Scroll down to the page on their website above to the heading 5. Table and Worksheets for the Self-Employed.
Take something calming, grab your Form 1040 tax return from last year, and go through the worksheet to figure out your maximum contribution. It’s a mind-bender and a pain in the ass, but stick it out.
Your spouse.
How much can they contribute to an i401k?
As you have seen above, the i401k is reasonably simple, but it's a little complicated when it comes to how much your spouse can contribute. For this one, I would definitely talk to your accountant, as the structure of your business (sole trader, partnership, S-Corp) and whether your spouse is a co-owner or an employee affects how much they can contribute.
Theoretically, your spouse could get to the maximum numbers above the same as you.
Solo401k.com has a great calculator, but again, please check with your accountant. https://www.solo401k.com/calculator
My real-life example in 2024:
I contributed $30,000 to the i401k as an employee; I’m 50.
I’m an S-Corp, a one-person company. I pay myself $120,000 per year via payroll, so I’m a W-2 employee of my company. My company can then contribute an additional 25% on top of the $120,000 into the i401k, which is $30,000.
$30,000 + $30,000 = $60,000 in to the i401k.
I use a deferred contribution, so it’s pre-tax, not a Roth. That’s a $60,000 tax deduction on my income! Example: If I earned $250,000 that year, I would only get taxed on $190,000.
What if I have a job with a 401k from an employer or Union, AND I want an i401k for my freelance biz?
Situation: You are paid W-2 by an employer, but you also pay yourself an income from your own freelance business (Sole Trader, LLC, S-Corp).
Employee Contribution.
Across all 401k and i401k accounts, you only get one employee (that’s you as a person) contribution limit of $23,500 or $31,000 if you are age 50+.
You can contribute 100% of your compensation up to the yearly limit. If you earn $20,000 in a year with your freelance biz, you can contribute the whole $20,000.
Example of Contributing to an employer 401k and your business i401k: You contribute $10,000 to your W-2 employer’s 401k and $13,000 to your freelance biz’s i401k. (If the employer gives you a matching payment, then perhaps max that out with the outside employer, then put the rest of your personal contribution in your freelance i401k).
Employer Contribution
Each employer gets a separate employer contribution limit. Your outside W-2 employer can contribute to that 401k plan, and your freelance business can contribute its own amount of 20% (Sole Trader) or 25% (S-Corp) to your i401k plan.
In this case, you have two employers with their own separate contribution limits:
The outside employer that pays you a W-2 wage.
Your business paying you is the second employer.
Employer Contribution Amount Limit Test
Think of this as another IRS rule on the limits so people don’t take the piss and contribute more to an i401k than they actually earn in their business. The employer limits above are still the maximum limits your business can contribute, but you must also pass this contribution test.
Your freelance business’s i401k employer contribution cannot be more than half the difference between the net self-employment income and the employee contribution. (Please chat with your accountant about it.)
Example: If your income from your freelance biz is $100,000 and your employee contribution to the i401k is $23,000. The max. employer contribution in this case is ($100,000 - $23,000) ÷ 2 = $38,500
Another Example: Your income from your freelance biz is $50,000, and your employee contribution to the i401k is $23,000. ($50,000 - $23,000) ÷ 2 = $13,500. So, $13,500 is your maximum employer contribution in this case.
Want to really dig into this? Dr. Jim Dahle, over at the White Coat Investor, has a great post on multiple i401k accounts. WCI is a highly respected website.
Contributions for the tax year can be made up to March/April of the following year.
I love this feature. The employer (your company’s) contributions can be deposited until March 15 of the following year if you’re a LLC/S-Corp/C-Corp and April 15 if you’re a Sole Trader. Basically, this is the date your entity has to submit its tax return. (As always, check ahead of time with your accountant.)
However, the employee’s $23,000 ($30,500 if age 50+) must be contributed during the calendar year.
Example: In February 2025, you could contribute funds to your i401k for the 2024 tax year.
WARNING!! IRS Form 5500-EZ:
Up to a $150,000 fine yearly (but most likely $500 annually up to $1,500). Yes. It’s the only red box on the site for a reason.
This has caught a few people out, including myself. Once your i401k reaches $250,000, you must file IRS form 5500-EZ annually. If you don’t, you face severe fines. Why does the IRS massively fine us? I have no idea; I cannot see the harm done to the Feds or the taxpayer if we forget to file it.
Schwab does NOT send you a notification or reminder. Some other providers may alert you, and some even file the 5500-EZ for you. It’s a real mess.
I suggest getting a tattoo somewhere on your body as a reminder to file it.
I have a blog post on the form in The Knowledge.
Yep, the IRS will fine your ass for this one.
Emergency withdrawals from the i401k
If the shit hits the fan and you need money fast because of an emergency, you may be tempted to pull from your i401k before retirement. This should be your last resort, as you are hurting future you. The money you pull out is growing and making you wealthy. Example: $20,000 today will be $77,000 based on a 7% growth rate in 20 years. See an accountant before you do anything as the rules are complex, but basically:
You will pay a 10% penalty unless you can show it’s a ‘hardship withdrawal’ such as:
You become permanently disabled,
Have qualifying medical expenses
Need the funds due to financial hardship.
Additionally, the IRS may allow penalty-free withdrawals in certain situations, such as when using funds to purchase a first home.
You will pay income tax on the withdrawal; there is a mandatory 20% that the i401k provider must withhold.
Example: If you pull out $20,000, you only get around $14,400 with the penalty.
Schwab does not allow loans, but you can with the E*Trade i401k.
You may be able to withdraw deposited funds (not any gains) from a Roth i401k without penalty, but again, that is a tricky one.
Please talk to your accountant before making any moves.