What Is the 401(k) Employer Deduction Limit?

A 401(k) contribution limit and an employer tax-deduction limit are not the same thing.

For a typical defined contribution plan, Section 404 generally limits the employer's deduction for employer contributions to 25% of compensation paid or accrued to eligible employees participating in the plan.^[1][2][3]

That 25% rule is easy to misread.

It does not mean:

• each participant can receive only 25% of compensation
• total money entering the plan is limited to 25% of payroll
• employee elective deferrals use the employer's 25% deduction room
• a contribution that satisfies Section 415 is automatically deductible
• a deductible contribution automatically satisfies every qualification rule.

The practical structure is:

Employer deduction limit → aggregate employer-level tax question

Section 415 annual-additions limit → participant-level contribution question

Written allocation formula → who receives the employer contribution

Those tests interact, but none replaces the others.

The Ordinary Rule Is 25% of Eligible Participant Compensation

Section 404(a)(3) generally allows an employer deduction for contributions to a profit-sharing or stock-bonus trust up to 25% of compensation otherwise paid or accrued to beneficiaries under the plan.^[3]

IRS summarizes the defined contribution rule the same way: employer contributions to a profit-sharing plan or money purchase pension plan generally cannot be deducted beyond 25% of compensation paid or accrued to eligible employees participating in the plan.^[1][2]

Assume a company has:

• 10 eligible participating employees
• $1,200,000 of compensation that can be used for the deduction calculation

The ordinary Section 404 ceiling is:

$1,200,000 × 25% = $300,000

That $300,000 is an aggregate employer deduction pool.

It is not ten separate employee limits.

What Employer Contributions Use the 25% Pool?

For an ordinary defined contribution plan, the employer contribution side can include amounts such as:

• matching contributions
• nonelective contributions
• discretionary profit-sharing contributions
• other employer contributions subject to the applicable defined-contribution deduction rule.^[1][2]

Suppose the same employer has a $300,000 ordinary deduction ceiling and makes:

• $90,000 of matching contributions
• $170,000 of profit-sharing contributions

Total employer contributions:

$260,000

The employer remains within the ordinary $300,000 deduction ceiling, assuming the remaining Section 404 requirements and other tax rules are satisfied.

Unused deduction room:

$40,000

That does not mean the employer can automatically contribute another $40,000 to any participant.

The allocation formula, Section 415, compensation limits, nondiscrimination rules and plan terms still control what can actually be allocated.

Employee Elective Deferrals Do Not Consume the 25% Deduction Ceiling

This is the rule that makes many informal 401(k) calculations wrong.

Section 404(n) states that elective deferrals are not subject to the specified Section 404 deduction limits and are not taken into account when applying those limits to other contributions.^[3]

IRS Publication 560 states the rule directly:

• elective deferrals are not subject to the 25% defined-contribution deduction limit
• compensation used in the deduction calculation includes elective deferrals.^[2]

Those two statements can look contradictory.

They are not.

Deferrals are outside the contribution numerator

Employee deferrals do not consume the employer's ordinary 25% deduction pool.

Deferrals can remain inside the compensation denominator

Pre-tax deferrals can still be part of compensation for the deduction calculation rather than reducing the compensation base merely because the employee elected to defer salary.^[2]

That distinction matters.

Example: Deferrals Do Not Reduce the Employer Deduction Pool

Assume:

• eligible compensation: $1,200,000
• employee elective deferrals: $200,000
• employer contributions: $300,000

Ordinary employer deduction ceiling:

25% × $1,200,000 = $300,000

The $200,000 of employee elective deferrals does not reduce that $300,000 employer-contribution ceiling under Section 404(n).^[3]

Conceptually, the plan can therefore have:

$200,000 employee deferrals + $300,000 employer contributions = $500,000 entering participant accounts

without the $500,000 itself being compared with a 25%-of-payroll ceiling.

Each participant still has separate Section 402(g), Section 415 and plan limits.

The employer also must satisfy every other applicable qualification and deduction rule.

The Compensation Base Is Not Unlimited

The employer cannot generally build the deduction denominator from unlimited compensation for each participant.

For 2026, the qualified-plan compensation limit is $360,000.^[1][2]

That amount matters because Section 401(a)(17) limits compensation taken into account under qualified-plan rules where the statutory cap applies.

Suppose an eligible employee earns:

$500,000

The deduction and allocation analysis cannot simply assume all $500,000 is usable plan compensation.

The applicable qualified-plan compensation limit and the plan's compensation definition must be applied.

INV-098 covers compensation definitions in detail.

Section 404 Is an Aggregate Employer Test

Section 404 answers a business-level question:

How much of the employer contribution can the employer currently deduct?

The ordinary calculation generally starts with:

total eligible participant compensation × 25%

That makes it fundamentally different from a per-person contribution ceiling.

Consider two companies.

Company A

Eligible compensation:

$2,000,000

Ordinary employer deduction ceiling:

$500,000

Company B

Eligible compensation:

$400,000

Ordinary employer deduction ceiling:

$100,000

The deduction capacity changes with the eligible compensation base.

It does not come from multiplying the Section 415 dollar limit by the number of employees.

Section 415 Is a Separate Participant-Level Limit

For 2026, annual additions to a participant's account generally cannot exceed the lesser of:

• 100% of compensation, or
• $72,000

before qualifying catch-up contributions.^[1]

Annual additions generally include:

• employee elective deferrals other than qualifying catch-up contributions
• employer matching contributions
• employer nonelective contributions
• voluntary employee after-tax contributions
• allocated forfeitures.^[1]

This creates the central contrast.

The same dollar can therefore be acceptable under one section and blocked by the other.

Example: Employer Has Deduction Room but Participant Hits Section 415

Assume:

• employer has $300,000 of unused Section 404 deduction capacity
• employee compensation is high enough for the dollar ceiling
• employee makes a $24,500 regular elective deferral for 2026
• no catch-up contribution applies
• employee has already received $47,500 of employer contributions

Annual additions:

$24,500 + $47,500 = $72,000

The participant has reached the 2026 Section 415 dollar ceiling.^[1]

The employer might still have hundreds of thousands of dollars of aggregate Section 404 deduction room.

That does not create more Section 415 space for this employee.

The remaining employer contribution must be allocated, if permitted, through the plan to employees who still have lawful allocation room under the written formula and applicable rules.

Example: Participants Fit Section 415 but the Employer Exceeds Section 404

Reverse the facts.

Assume:

• all participant allocations fit within their individual Section 415 limits
• aggregate eligible compensation produces a $250,000 ordinary Section 404 ceiling
• employer contributes $300,000 of employer money

The participant limits do not rescue the employer deduction.

The employer is:

$50,000 above the ordinary current deduction ceiling

That excess can create carryover and excise-tax consequences.^[2][8]

This is why:

"No employee exceeded $72,000"

is not a deduction analysis.

Matching Contributions and Profit Sharing Share the Employer Deduction Pool

A business sometimes calculates its match and discretionary profit sharing as if each source receives a separate 25% deduction limit.

That is generally wrong.

The Section 404 framework applies to employer contributions to the defined contribution plan, and multiple defined contribution arrangements can require aggregation for deduction purposes.^[3][4]

Assume:

• eligible compensation: $1,000,000
• ordinary Section 404 ceiling: $250,000
• employer match: $80,000
• profit sharing: $190,000

Total employer contributions:

$270,000

The plan does not get:

$250,000 for match + another $250,000 for profit sharing

just because those amounts are tracked in different contribution sources.

The employer needs to analyze the combined employer contribution under the applicable deduction rules.

Safe Harbor Contributions Have a Specific Statutory Rule

Section 404(a)(3) does not simply state "25% and stop."

For the covered profit-sharing trust rule, the deductible amount can be the greater of:

• 25% of covered compensation, or
• the amount the employer is required to contribute under the specified Section 401(k)(11) safe-harbor rule.^[3]

That matters because Congress did not intend the ordinary percentage ceiling to make a required safe-harbor contribution nondeductible merely because of the way the aggregate compensation calculation works.

This is a narrow statutory rule.

It should not be generalized into:

"Anything called safe harbor is deductible without limit."

INV-053 covers safe-harbor 401(k) contribution structures.

The Written Plan Formula Still Controls the Allocation

A deduction limit does not authorize the employer to improvise allocations.

Suppose Section 404 permits the employer to deduct up to:

$300,000

but the written plan formula produces a maximum employer allocation of:

$220,000

The extra $80,000 of theoretical deduction capacity does not let the sponsor rewrite the allocation after year-end.

The employer needs:

1. a lawful contribution under the plan document
2. a correct allocation
3. a contribution within participant limits
4. a contribution satisfying qualification rules
5. a contribution that is deductible under Section 404.

Deductibility comes after the plan has a lawful contribution to deduct.

Profit-Sharing Discretion Is Not Deduction Discretion

INV-101 explains that an employer can often decide whether to make a discretionary profit-sharing contribution for a year.

That discretion concerns:

whether and how much the employer contributes

within the plan's written structure.

Once the employer chooses the amount, Section 404 asks a separate question:

how much can be deducted for the employer's taxable year?

A plan can permit a large discretionary contribution without guaranteeing a current deduction for every dollar.

Contribution Timing Can Affect the Deduction Year

Section 404 contains a timing rule that can treat a contribution as made on the last day of the preceding taxable year when:

• it is made on account of that taxable year, and
• it is paid by the time prescribed for filing the employer's return for that taxable year, including extensions.^[3]

IRS Publication 560 summarizes the practical rule: deductible contributions for a tax year can generally be made by the due date of the employer's return, including extensions, subject to the applicable plan and statutory requirements.^[2]

That is why an employer can often fund a prior-year profit-sharing contribution after December 31.

But the deadline is not a universal retroactive-contribution switch.

A Post-Year-End Deposit Needs the Correct Tax-Year Treatment

A contribution made in March can potentially be deductible for the prior calendar tax year.

That does not mean every March deposit is automatically a prior-year contribution.

The employer should be able to establish:

• which taxable year the contribution is on account of
• the applicable plan year
• the allocation under the plan document
• the contribution authorization
• the actual payment date
• the employer's tax-return due date and extension status
• whether another deduction-year rule applies.

IRS has specifically addressed situations in which employer contributions made after year-end miss the Section 404(a)(6) deadline and therefore cannot simply be deducted for the intended prior year.^[5]

Example: Contribution Made Before the Extended Return Due Date

Assume a calendar-year corporation makes a discretionary employer contribution after December 31 but before its extended federal return due date.

If:

• the contribution is on account of the prior taxable year
• the Section 404 timing rule applies
• the plan terms and allocation support that treatment
• the deduction amount fits within the applicable ceiling

the contribution can potentially be treated as made for that prior taxable year.^[2][3]

The tax return and plan records should tell the same story.

Example: The Deadline Is Missed

Assume the employer intended a contribution for Year 1 but pays it after the Section 404(a)(6) deadline for Year 1.

The employer cannot simply write:

"Year 1 contribution"

on the check and force a Year 1 deduction.

IRS guidance shows that the contribution can instead fall into the deduction analysis for the later taxable year, consuming room that otherwise might have been available for that later year's contributions.^[5]

Timing errors can therefore create a second problem:

one late contribution can crowd out the next year's deduction capacity.

Excess Employer Contributions Can Be Carried Forward

Section 404 permits specified excess contributions to be deducted in succeeding taxable years, subject to the future-year limit.^[2][3]

Suppose:

• current-year deductible ceiling: $250,000
• employer contribution: $300,000

Potential current deduction:

$250,000

Excess contribution carryover:

$50,000

In a later year, that $50,000 can potentially be deducted if sufficient deduction capacity exists after applying the applicable carryover rules.^[2]

The carryover does not mean the excess was harmless.

A Deduction Carryover Can Still Produce Excise Tax

IRS Publication 560 warns that nondeductible contributions can be subject to a 10% excise tax.^[2]

Form 5330 is used to report Section 4972 tax on nondeductible contributions to qualified plans.^[8]

So the sequence can be:

Employer contributes too much → current deduction is limited → excess becomes carryover → possible 10% excise tax applies

The fact that a future deduction may exist does not erase the current excise-tax issue.

Example: $50,000 Nondeductible Contribution

Assume:

• ordinary deduction ceiling: $250,000
• deductible employer contributions: $250,000
• total employer contribution: $300,000
• no special exception changes the result

Potential nondeductible excess:

$50,000

Potential Section 4972 excise tax at 10%:

$5,000

subject to the precise statutory and Form 5330 rules.

The $50,000 can still be relevant as a carryover for a later deduction year.^[2][8]

This is why an employer should calculate the deduction ceiling before funding a large year-end contribution—not after the tax return has already exposed the excess.

Multiple Defined Contribution Plans Can Share One Deduction Limit

Section 404(a)(3) contains aggregation rules for multiple covered trusts.^[3]

IRS also explains that when an employer contributes to two or more defined contribution plans, those plans are considered together for the 25% deduction analysis.^[4]

A sponsor therefore cannot reliably create extra deduction room by splitting employer contributions among:

• Plan A
• Plan B
• a second profit-sharing trust

when Section 404 requires them to be treated as one for the deduction calculation.

The plan-level legal structure and the employer's other retirement plans should be reviewed before assuming multiple deduction pools exist.

Defined Benefit Plus Defined Contribution Requires Another Layer

An employer maintaining both:

• a defined benefit plan, and
• a defined contribution plan

can encounter the combined deduction rules in Section 404(a)(7).^[3][4]

The combined rules are more technical than the ordinary 25% defined-contribution calculation.

Section 404(a)(7) contains special treatment for defined contribution employer contributions at or below specified percentages and for amounts above those thresholds.^[3][4]

The important point for a business owner is not to memorize the combined-plan formula.

It is to recognize when the simple calculation:

25% × compensation

is no longer the entire Section 404 analysis.

A cash-balance-plus-401(k) design should be modeled by the plan's actuary, TPA and tax adviser before year-end funding decisions are finalized.

Employee Deferrals Still Matter Under Other Limits

Because Section 404(n) removes elective deferrals from the ordinary employer deduction limit, a sponsor might conclude:

"Deferrals don't count."

That is too broad.

Employee elective deferrals still matter for:

• the Section 402(g) employee deferral limit
• Section 415 annual additions
• ADP testing when applicable
• payroll withholding and reporting
• compensation calculations
• Roth catch-up requirements when applicable
• plan-specific contribution limits.^[1][9]

The correct statement is narrower:

Elective deferrals do not consume the ordinary Section 404 employer deduction ceiling.

Catch-Up Contributions Add Another Distinction

Qualifying catch-up contributions can sit outside the ordinary Section 415(c) annual-additions ceiling.^[1]

That creates three different contribution layers for an eligible participant:

1. regular elective deferrals
2. employer and other annual additions
3. qualifying catch-up contributions

Section 404's employer deduction ceiling is still a separate aggregate calculation.

A sponsor should not use one headline number such as:

"$80,000 total 401(k) limit"

to perform all three tests.

INV-099 and INV-100 separate the Section 415 and elective-deferral limits.

Self-Employed Owners Do Not Apply 25% Directly to Schedule C Profit

The self-employed calculation is one of the most common errors in owner-only retirement plans.

For a self-employed individual, the deduction for the owner's own employer contribution reduces the compensation used to calculate that contribution.

The variables depend on each other.

IRS therefore requires a reduced-rate calculation.^[2][6]

For a plan contribution rate of:

25%

the standard self-employed reduced rate is:

20%.^[2]

The mathematical relationship is:

25% ÷ 125% = 20%

That is why a sole proprietor generally cannot calculate the owner employer contribution by simply taking:

25% × Schedule C net profit

before the required self-employment adjustments.

The Self-Employed Calculation Also Adjusts for Self-Employment Tax

IRS Publication 560's worksheet begins with self-employment income and incorporates the deduction for the deductible portion of self-employment tax before applying the reduced contribution rate.^[2]

Conceptually:

business net earnings − deductible portion of self-employment tax → adjusted net earnings

Then the applicable reduced contribution rate is applied, subject to the remaining limits.

For a 25% stated plan rate:

reduced rate = 20%

The actual computation should follow the current IRS worksheet rather than a shortcut.

Elective Deferrals Make the Self-Employed Calculation More Complex

A sole proprietor with a one-participant 401(k) can potentially make:

• employee elective deferrals, and
• an employer contribution

for the same person.

Those amounts use different rule sets.

Section 404(n) keeps elective deferrals outside the ordinary employer deduction ceiling.^[3][6]

Section 415 then recombines the applicable annual additions at the participant level.^[1]

The self-employed worksheet also has to coordinate:

• net earnings
• self-employment tax deduction
• employer contribution
• elective deferrals
• catch-up contribution, if eligible
• annual-additions ceiling.

This is why:

"25% employer plus $24,500 employee"

can be directionally useful but is not a complete sole-proprietor calculation.

S Corporation Owners Use Compensation, Not Distributions, for Plan Purposes

A shareholder-employee of an S corporation is not treated like a sole proprietor for retirement-plan compensation merely because the owner controls the business.

The employer contribution is based on eligible employee compensation under the plan and tax rules.

S corporation shareholder distributions are not automatically retirement-plan compensation.

INV-098 covers compensation definitions and owner structures in more detail.

The deduction analysis should therefore start with the correct compensation population before the 25% calculation is applied.

The Deduction Limit Does Not Override Nondiscrimination

An employer can be below the Section 404 ceiling and still have a plan problem.

Example:

• Section 404 deduction ceiling: $300,000
• employer contribution: $200,000

The deduction math appears to fit.

But the plan can still fail because of:

• incorrect employee exclusions
• Section 410(b) coverage
• Section 401(a)(4) nondiscrimination
• ADP or ACP testing
• top-heavy minimums
• compensation errors
• allocation-formula errors
• related-employer population errors
• Section 415 excesses.

Section 404 answers:

how much can be deducted

not:

whether every allocation was legally correct.

The Deduction Limit Does Not Override the Plan Document

The reverse is also true.

A plan sponsor cannot say:

"Section 404 lets us deduct $250,000, so we can put $250,000 into the plan."

The plan document might produce:

• a lower discretionary allocation
• a fixed match
• a required nonelective contribution
• a new-comparability allocation that requires testing
• eligibility conditions that exclude some compensation from the allocation population.

The employer's deduction capacity is not a contribution authorization.

Compensation Errors Can Create Both Plan and Tax Problems

IRS specifically warns that using compensation above the amount permitted by the Code can create a nondeductible employer contribution and possible excise-tax consequences.^[7]

That means compensation errors can spread across several calculations at once.

One bad compensation field can distort:

• participant allocation
• employer deduction ceiling
• Section 415 limit
• nondiscrimination testing
• top-heavy minimum
• employer tax return.

The plan census should not treat "compensation" as one universal number.

Different Code sections can require different definitions.

A Better Way to Reconcile the Employer Contribution

For a defined contribution plan, use this sequence.

1. Identify the legal employer and participating employee population

Confirm:

• plan sponsor
• related employers
• eligible employees
• participating employees
• self-employed owners
• leased or common-law employees when relevant.

INV-090 through INV-093 cover employer-group and worker-classification issues.

2. Determine the compensation base

Apply:

• plan compensation definition
• statutory compensation definition where required
• 2026 $360,000 compensation cap where applicable
• self-employed adjustments.

INV-098 covers this layer.

3. Calculate the employer contribution under the written formula

Separate:

• match
• nonelective contribution
• profit sharing
• safe-harbor source
• other employer sources.

4. Check participant-level limits

Apply:

• Section 402(g)
• Section 415(c)
• catch-up rules
• plan-specific limits.

INV-099 and INV-100 cover these limits.

5. Apply coverage and nondiscrimination rules

Depending on the plan:

• ADP
• ACP
• Section 410(b)
• Section 401(a)(4)
• new-comparability cross-testing
• permitted disparity
• top-heavy rules.

INV-084 through INV-089 and INV-102–103 cover these systems.

6. Calculate the Section 404 deduction ceiling

For the ordinary defined contribution rule:

25% × eligible participant compensation

then coordinate any applicable special rules, multiple plans and carryovers.^[2][3][4]

7. Verify contribution timing

Confirm the payment date and the taxable year for which the employer is claiming the deduction.^[2][3][5]

8. Identify nondeductible excess before filing

If an excess exists:

• quantify current deduction
• quantify carryover
• evaluate Section 4972 excise tax
• determine Form 5330 reporting.^[2][8]

This order prevents the common mistake of treating the tax deduction as the starting point for the plan allocation.

Worked Example: Ordinary Employer Deduction

Assume:

• 8 eligible participating employees
• total applicable compensation: $1,200,000
• employee elective deferrals: $160,000
• employer match: $80,000
• profit sharing: $180,000

Ordinary Section 404 employer deduction ceiling:

$1,200,000 × 25% = $300,000

Employer contributions using the pool:

$80,000 + $180,000 = $260,000

Unused ordinary deduction room:

$40,000

Employee elective deferrals:

$160,000

do not consume the $300,000 employer deduction pool under Section 404(n).^[3]

That does not mean $40,000 can automatically be added.

Participant Section 415 limits and the written allocation formula still control.

Worked Example: Section 415 Stops One Participant First

Assume one participant has:

• 2026 regular elective deferral: $24,500
• employer match: $10,000
• profit-sharing contribution: $37,500

Annual additions:

$24,500 + $10,000 + $37,500 = $72,000

The participant has reached the ordinary 2026 Section 415(c) dollar limit before catch-up contributions.^[1]

Even if the employer still has:

$100,000

of unused aggregate Section 404 deduction capacity, that participant cannot simply receive another $10,000 of ordinary annual additions.

Worked Example: Section 404 Stops the Employer First

Assume:

• eligible compensation: $800,000
• ordinary deduction ceiling: $200,000
• all participant allocations fit Section 415
• employer contributes $230,000

Potential current deductible amount:

$200,000

Potential excess:

$30,000

The $30,000 can potentially become a deduction carryover but may also create Section 4972 excise-tax exposure.^[2][8]

Passing every participant's Section 415 test did not create a $230,000 deduction.

Worked Example: Employee Deferrals Sit Outside the 25% Pool

Assume:

• eligible compensation: $1,000,000
• ordinary employer deduction ceiling: $250,000
• employee deferrals: $180,000
• employer contributions: $250,000

Total contributions entering accounts:

$430,000

The employer-contribution portion equals the ordinary $250,000 Section 404 ceiling.

The $180,000 of employee elective deferrals does not consume that ceiling.^[3]

Individual Section 402(g) and Section 415 calculations still apply employee by employee.

Worked Example: Self-Employed Owner

Assume a sole proprietor's plan states an employer contribution rate of:

25% of compensation

The IRS reduced-rate table converts that to:

20%

for the self-employed contribution calculation.^[2]

The owner then applies the current IRS worksheet to net earnings after the applicable self-employment tax adjustment and coordinates elective deferrals and Section 415.

The correct calculation is not:

Schedule C profit × 25%

because the owner's contribution itself affects the compensation measure.

Section 404, Section 415 and the Plan Formula Solve Different Problems

Use the three-test model.

Plan formula

Who receives the employer contribution, and how much does the formula allocate?

Section 415

How much can be added to each participant's account for the limitation year?

Section 404

How much of the employer contribution can the employer deduct for the taxable year?

A fourth layer sits beside them:

Deposit and tax timing

When was the contribution actually paid, and for which year can it be treated as made?

Many 401(k) errors begin when these four questions are collapsed into one number.

Questions to Ask Before Funding a Large Employer Contribution

1. What is total eligible participant compensation for the Section 404 calculation?
2. Has the applicable compensation cap been applied correctly?
3. How much matching contribution has already been made?
4. How much nonelective or profit-sharing contribution is proposed?
5. Are employee elective deferrals being excluded from the 25% employer deduction pool?
6. Are those deferrals still being handled correctly in the compensation and Section 415 calculations?
7. Does any participant hit Section 415 before the employer reaches the aggregate deduction ceiling?
8. Does the plan maintain another defined contribution plan?
9. Does the employer also maintain a defined benefit or cash balance plan?
10. Is there a deduction carryover from a prior year?
11. Is the employer relying on the tax-return due date to fund the contribution after year-end?
12. Is the contribution clearly documented as being on account of the intended taxable year?
13. Does a self-employed owner require the reduced-rate worksheet?
14. Could any nondeductible amount create Section 4972 excise tax or Form 5330 reporting?

If those questions are answered before funding, the contribution is much easier to reconcile.

The Section 404 Reconciliation Formula

For an ordinary defined contribution plan, start with:

Eligible participant compensation × 25% = preliminary employer deduction ceiling

Then adjust the analysis for:

prior-year carryovers + applicable special statutory rules + multiple-plan rules + self-employed calculations + actual payment timing

Finally compare the employer contribution sources against that result.

Separately run:

participant Section 415 limits + elective-deferral limits + plan allocation rules + nondiscrimination and top-heavy tests

The most useful discipline is keeping the questions separate until the final reconciliation.

Section 404 limits the employer's deduction. It does not define the participant's contribution limit, the allocation formula or the funding deadline by itself.

Sources & References

1. Internal Revenue Service: 401(k) and Profit-Sharing Plan Contribution Limits — https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits
2. Internal Revenue Service: Publication 560 — Retirement Plans for Small Business — https://www.irs.gov/publications/p560
3. 26 U.S.C. §404 — Deduction for Contributions of an Employer — https://www.law.cornell.edu/uscode/text/26/404
4. Internal Revenue Service: Combined Limits Under IRC Section 404(a)(7) — https://www.irs.gov/retirement-plans/combined-limits-under-irc-section-404a7
5. Internal Revenue Service: Deductibility of Employer Contributions to a 401(k) Plan Made After the End of the Tax Year — https://www.irs.gov/retirement-plans/issue-snapshot-deductibility-of-employer-contributions-to-a-401k-plan-made-after-the-end-of-the-tax-year
6. Internal Revenue Service: Calculation of Plan Compensation for Sole Proprietorships — https://www.irs.gov/retirement-plans/calculation-of-plan-compensation-for-sole-proprietorships
7. Internal Revenue Service: Avoiding Compensation Errors in Retirement Plans — https://www.irs.gov/retirement-plans/avoiding-compensation-errors-in-retirement-plans
8. Internal Revenue Service: Instructions for Form 5330 — https://www.irs.gov/instructions/i5330
9. Internal Revenue Service: Retirement Topics — Contributions — https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-contributions
10. Internal Revenue Service: Notice 2025-67 — 2026 Cost-of-Living Adjustments — https://www.irs.gov/irb/2025-49_IRB

Educational Disclaimer

ROIStreet publishes educational content about retirement-plan contribution, deduction and administration rules. This article is not legal, tax, accounting, fiduciary or plan-administration advice. Employer deductions can depend on the written plan, employer tax year, plan year, compensation definition, contribution source, business form, related employers, other retirement plans, payment timing, prior-year carryovers and current law.

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