My Single member LLC is taxes as an S-Corp. I have a solo 401K. Is the amount i contribute to my 401K dependent on my annual (W-2) salary?

[Jerry0000]

I yielded $20K in my first year. Can i still contribute $18K to my solo 401K, or is the amount i'm allowed to contribute dependent on my salary?

[dmertz]

The maximum amount your S corp can contribute to your 401(k) as the employer contribution is 25% of your W-2 compensation.

If you were under age 50 in 2017, your maximum employee elective deferral is $18,000 or your available W-2 compensation after subtracting any taxes withheld, whichever is less.  (Your total of elective deferral, tax withholding, Social Security tax and Medicare tax cannot exceed your compensation.)  However, your election to make an elective deferral was required to have been made by December 31, 2017.  Under Department of Labor regulations, the deposit of your elective deferral should have been made by January 15, 2018.

[Jerry0000]

So even if your total W-2 salary is $20K, you can still take a maximum elective deferral of $18K? And on top of that the company can contribute an additional 25% of my W-2. IS that correct? Note, This is assuming a total net profit of $40K for the year ($20K in W2 earnings and $20K retained by the company).

[dmertz]

If your salary was $20,000, your Social Security and Medicare taxes would be $1,530, leaving $18,470.  If you had no more than $470 withheld for income taxes, that would leave a sufficient amount to be able to make an elective deferral of $18,000.  (The $20K retained by the S corp does not enter into the calculation.)  With a salary of $20,000, no income tax withholding and a $18,000 elective deferral your W-2 would be expected to show:

Box 1 = $2,000
Box 2 = income tax withholding of $470 or less
Box 3 = $20,000
Box 4 = $1,240
Box 5 = $20,000
Box 6 = $290
Box 12 code D = $18,000

Your S corp could make an employer contribution to your 401(k) of up to $5,000.
(Note that the solo 401(k) plan needs to be established under the S corp.)
If the S corp makes a $5,000 employer contribution, that would reduce the income passed through on the Schedule K-1 (Form 1120S) from $20,000 to $15,000 (I think; I'm not sure how the S-corp accounting works given the employer contribution is made the following year).