Pursuant to Code Section 401(a)(17), the maximum amount of compensation that can be taken into account for Solo 401k contribution purposes is $250,000 for 2012, and it was $245,000 for 2011. Simply put, after your Open Solo 401k and begin making contributions to it based on income generated from your self-employment business for which the Solo 401k was established for, you cannot calculate/base the Solo 401k contribution on income generated in excess of $250,000. Your Solo 401k provider should have a free Solo 401k Calculator on their website to assist you in making sure you don't base your annual solo 401k contribution on compensation in excess of the allowable yearly limit.Note that the annual contribution limit is separate from the rollover or transfer limits, which are unlimited and also are not subject to the $250,000 annual compensation limit.
The good news is that the limit on compensation is subject to adjustment, usually on an annual basis. The increase is usually in increments of $5,000 annually. For example it increased from $245,000 in 2011 to $250,000 in 2012.
The good news is that the limit on compensation is subject to adjustment, usually on an annual basis. The increase is usually in increments of $5,000 annually. For example it increased from $245,000 in 2011 to $250,000 in 2012.
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