As a business owner, your tax strategy is your most powerful tool. And nothing delivers a better one-two punch of tax savings and long-term security than the right retirement plan.
We’ve updated your quick guide to the best plans for entrepreneurs, solopreneurs, and small business owners for Tax Year 2025.
The most significant tax-advantaged plans for business owners fall into four categories, offering varying levels of complexity, contribution limits, and employee responsibilities.
The Solo 401(k) is the undisputed champion for maximizing retirement savings, particularly for single-owner businesses with no full-time employees (other than a spouse).
| Who It’s For | Solopreneurs, consultants, and owners with no common-law employees. |
| Maximum Total Contribution (Under 50) | $70,000 |
| Maximum Total Contribution (Age 50+) | $77,500 (Standard Catch-Up) or $81,250 (Expanded Catch-Up, ages 60-63) under certain rules you may be eligible for higher catch-up amounts |
| How It Works | Allows you to contribute in two capacities: 1. Employee Deferral (up to $23,500) and 2. Employer Profit-Sharing (up to 25% of compensation). |
| Pro Tip | Roth Option: Unlike a SEP IRA, the Solo 401(k) allows you to make Roth employee contributions, letting your growth escape taxes forever (tax-free distributions later). |
The SEP IRA is the easiest plan to set up and administer, making it ideal for established businesses (including those with employees) that want maximum flexibility year-to-year.
| Who It’s For | Self-employed individuals and small businesses with employees. |
| Maximum Total Contribution | $70,000 |
| How It Works | Contributions are employer-only. The limit is the lesser of $70,000 or 25% of the employee’s compensation.
For self-employed persons the percentage effectively is ~20% of net earnings (after SE tax deduction) — this matters for entrepreneurs! |
| Pro Tip | Ultimate Flexibility: You are not required to contribute every year. You can wait until the business tax filing deadline (plus extensions) to decide how much to contribute for the prior tax year. |
| The Catch | If you contribute for yourself, you must contribute a proportional percentage for every eligible employee. |
The SIMPLE IRA is a great alternative to a 401(k) for businesses with up to 100 employees who are looking for lower administrative costs and mandatory contributions that encourage staff retention.
| Who It’s For | Businesses with 100 or fewer employees. |
| Employee Deferral Limit | $16,500 |
| Employee Catch-Up (Age 50+) | $3,500 (Standard) or $5,250 (Expanded Catch-Up, ages 60-63). |
| Employer Contribution | Mandatory contributions made via one of two methods: 1. Dollar-for-dollar match up to 3% of pay, OR 2. Non-elective contribution of 2% of the employee’s compensation. |
| Pro Tip | Easy Eligibility: Employees are generally eligible if they have received $5,000 in compensation during any two preceding calendar years. |
These individual plans are available to everyone with earned income, but their contribution limits are generally too low to serve as the main strategy for a successful business owner.
| Traditional IRA | Roth IRA | |
| 2025 Contribution Limit | $7,000 ($8,000 if age 50+) | $7,000 ($8,000 if age 50+) |
| Tax Treatment | Contributions are Pretax (reduce your taxable income now). | Contributions are After-Tax (distributions are tax-free later). |
| Limitation | Your ability to deduct contributions may be phased out based on income and if you are covered by a workplace plan. | Your ability to contribute is phased out entirely at higher income levels (AGI: $150,000 to $165,000 for singles in 2025). |
Contributions you make as the employer (Profit-Sharing, Matching, or Non-Elective) are generally deductible business expenses.
For self-employed plans (SEP and Solo 401(k)), the employer contribution deadline is the tax filing due date, including extensions. However, Solo 401(k) elective deferrals must be elected by December 31 of the year (though the contribution itself may be later until tax deadline).
This means we can often help you reduce your current tax liability right up until the final tax deadline of the following year!
Ready to stop guessing which plan is right for you? As a strategic tax and accounting firm in Western New York, we don’t just file your returns; we help you design the financial structures to ensure you keep more of what you earn and retire on your own terms. Contact us today for a proactive strategy session.