Contribution relative to earned income

[Guest geohurl]

I am a self employed individual with a individual 401K plan. I know I am able to contribute $20,000 (I'm over 50 yrs old) + additional amounts up to approx. 25% of net income (less the write off which makes it approx. 20%) not to exceed $45,000. Okay, here it is - my income is very low this year and my net income will probably be around $30,000 (I hope), or less - will I be able to contribute 100% of my net income? I believe I can. I just can't contribute more than my net business income. Please confirm and thank you for a response.

[Bird]

As a participant, you can have an allocation of 100% of compensation (net earned income), but as an employer, you can't deduct more than 25%, so that will be your limiting factor. If your profit before plan contributions is $30K, then you can make an employER contribution of roughly 20%, or $6,000, and a 401(k) (employEE) contribution of $20,000.