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Solo 401(k) or 401(k) profit-sharing plan
A 401(k) can let an owner defer up to $24,500 of pay for 2026 ($8,000 more at age 50 or over, with a higher catch-up at ages 60 to 63), plus employer contributions, within the plan's overall annual limit. A solo 401(k) is for an owner with no employees other than a spouse. If you have eligible staff, plan rules, coverage testing and costs change. Timing for starting the plan and making deferrals depends on how the business is taxed.
One useful actionBefore year-end, ask a tax professional whether you have eligible employees and what the plan must be in place by.
IRS one-participant 401(k) plans ↗ IRS 2026 retirement plan limits ↗02
SEP IRA
Employer contributions to a SEP-IRA can be up to the lesser of 25% of pay or $72,000 for 2026. For a self-employed owner the percentage works out lower because of how earnings are figured. A SEP can generally be set up and funded as late as the tax return due date, including extensions, but it usually must cover eligible employees at the same percentage as the owner.
One useful actionAsk your tax professional to compare the SEP against a 401(k) using your actual income and staff.
IRS SEP contribution limits ↗ IRS retirement plans for self-employed people ↗03
Cash balance plan
A cash balance plan is a type of defined benefit plan. It can allow much larger deductible contributions than a 401(k) or SEP, which is why high-income owners nearing retirement look at it. It also carries required annual contributions, actuary fees, ongoing administration and rules for covering employees, so it is a multi-year commitment.
One useful actionAsk a plan administrator to model the contribution, the staff cost and what happens in a down year before deciding.
IRS defined benefit plan guidance ↗Also worth planning with a tax professionalAugusta rule. Under Section 280A(g), if you rent out a home you also use as a residence for fewer than 15 days in a year, the rent is not taxable income to you. For a business renting your home for meetings, that means up to 14 days. The rent must be a fair market rate, the use must be a real business use, and it needs a written agreement, minutes or an agenda, and proof of the rate. It does not work for a sole proprietor renting to themselves.
Paying family members. Wages paid to a family member can be deductible when the work is real and the pay is reasonable for the job. Keep time records and job duties. Payroll tax treatment depends on the entity and the family member's age. A child under 18 working for a parent's sole proprietorship is exempt from Social Security and Medicare tax, but not from income tax withholding rules. Corporations do not get that exemption.
IRS residential rental property guidance ↗ IRS family employee rules ↗
Business expenses must be ordinary and necessary. Keep receipts and the business purpose; separate personal use and reimbursements. Dollar limits shown are for 2026 and can change; eligibility and entity type matter. General education, not individual tax advice.
