Solo 401K and Solo ROTH 401K for sole proprietor LLC

[JDSchachte]

My wife is a sole proprietor (58 years old) with an LLC.  She receives a 1099-NEC. 

She has only had a SOLO 401K until 2025, and never had a problem with Turbo Tax reporting.  i.e. in 2024 tax year she contributed $30K (including catch up) plus a company match of $15K, totaling $45K.  Her income was 65K.  All report properly as $45K was deducted from income.

This year, 2025, her income was $70K (profit = $66.8K).  She added a ROTH Solo 401K and mixed the contributions as follows:  $31K employee contribution, 11K went to the Solo 401K, and $20K (12.5K+ $7.5K catch up) to the Roth Solo 401K.  An additional $15K was made as Employer contribution to Solo 401K.  So, the math says $26K was contributed to the deductible account (not the ROTH).  Right?

Turbo tax appears to only be accepting $23,414 as a deductible amount.  Why doesn't TT show $26K ($15 employer contribution + $11K employee contribution) in the summary screen "Less common Business Situations; Self-employed Retirement"?

[ReneV4 · Accepted solution]

The reason TurboTax is not showing the full contribution is due to how they were made. 

In 2024, she put $30k into the Employee side. Because she didn't use a ROTH, that entire $30k was deductible. This year, by putting $20k into a Roth, she used up her contribution space with money that doesn't provide a tax deduction today.

Additionally, as a sole proprietor, Your employer contribution is limited to 20% of your "Net Earnings from Self-Employment".

If you want to see the IRS's exact math, you can view the Self-Employed Deduction Worksheet in TurboTax. It will show you the step-by-step subtraction of the Self-Employment (SE) tax and the 20% calculation that led to that reduced figure.

Since TurboTax is only accepting a reduced amount as the legal limit, if she deposited the full amount, she may have an excess contribution. 

Check if  that extra amount should be removed from the account to avoid an IRS penalty for over-contributing.

If you do have an over-contribution, contact your financial institution and ask for a return of excess contribution for that extra amount.