Question: My wife has been hired as an independent contractor to give language lessons. She has other teaching jobs where she receives W-2s. She contributes to a 403(b) through those jobs, but is below the $18,000 elective deferral limit. She would like to contribute as much as possible of her 1099-MISC income to a Solo 401(k). Contributing 100% of this income would still keep her below the $18,000 limit, and I'm aware that the $18,000 applies across any combination of 401(k)-like accounts.

How can we correctly calculate the maximum amount she can contribute? By this, I mean how do we calculate the amount she needs to exclude from her earnings for taxes or other purposes so that she can contribute the maximum amount of her earnings?

Answer: 
There are two types of 401(k) contributions: "elective contributions," which are the part put in by the employee and "nonelective contributions," which are the part put in by the company. 

* **Elective contributions** are summed across all the plans she is contributing to. So she can contribute $18,000 minus whatever she put in her 403(b).
* Additionally she can contribute 20% of the net profit of the company (before the elective contributions) as **nonelective contributions** (these contributions must be designated as such). You will notice that the IRS document says 25%, but that's what you can do if her business is incorporated. For a sole proprietorship, nonelective contributions ends up being limited at 20% of profit.

Additionally, the sum of these two and her contribution to her 403(b) cannot exceed $53,000.

Example: line 31 of her schedule C is $30,000 and she has contributed $10,000 to her 403(b).

Maximum contribution to her solo 401(k) is

($18,000 - $10,000) + 0.2 \* $30,000 = $14,000

Her total contributions for the year are $10,000 from her 403(b) plus $14,000 in her solo 401(k). This is less than $53,000 so this limit does not bind. If she made a ton of 1099 money, her contribution maximum would follow the above until it hit $53,000 and then it would stop there.

The IRS describes this in detail in [Publication 560](https://www.irs.gov/pub/irs-pdf/p560.pdf), which also has a worksheet for figuring out your maximum explicitly. It's unpleasant reading and the worksheets are painful, but if you do it right, it will end up being as I just described it. Using the language of that publication, hers is a "qualified plan" of the "defined contribution" variety.
[The maximum you can contribute to both the 403(b) and 401(k) is $18,000](https://www.irs.gov/retirement-plans/how-much-salary-can-you-defer-if-you-re-eligible-for-more-than-one-retirement-plan). Take the amount you already contributed and subtract it from $18,000. That's how much you have left to contribute before maxing out.