Here we are in February 2026, and if you're a solo business owner without a retirement plan, you're sitting on one of the best tax-saving time machines the IRS has ever offered. And the clock? Yeah, it's ticking.
You've got a narrow window to lock in a $500 tax credit for 2025, plus the chance to make retroactive contributions before your tax filing deadline hits. We're not letting you leave a penny on the table, so buckle up. This is your "last call" for some serious tax savings.
The $500 You Didn't Know You Could Get
Let's start with the star of the show: the Automatic Enrollment Credit. Thanks to SECURE 2.0, solo business owners (yes, even if you're a party of one) can snag a $500 tax credit just for setting up a retirement plan with automatic enrollment.
Here's how it works:
- If you set up a plan anytime in 2025 (or retroactively establish one before you file your 2025 taxes), you can claim the credit on your 2025 return.
- The credit is $500 per year for the first three years. For most solo operators, that's the full $1,500.
- It's a credit, not a deduction, meaning it's a dollar-for-dollar reduction of what you owe Uncle Sam.
Think of it as the IRS saying, "Hey, thanks for saving for your future. Here's some free money to get you started." And who doesn't love free money?
Why February 2026 Is Your Golden Opportunity
Now here's where the magic happens. We're sitting in February 2026, which means:
- You can still establish a Solo 401(k) for 2025, as long as you do it before your tax filing deadline, April 15, 2026.
- You can make retroactive contributions for 2025, reducing your 2025 taxable income right when you need it most.
- You claim the $500 credit on your 2025 return, giving you both an upfront credit AND the benefit of tax-deferred (or Roth) contributions.
This is like finding out you can still buy a lottery ticket after the winning numbers have been announced. The opportunity is real, but the window is closing fast.
The 2026 Contribution Limits: What's Changed?
While we're locking in those 2025 benefits, let's talk about what's ahead for 2026. The contribution limits have ticked up slightly, so here's what you need to know:
For 2026:
- Employee deferral limit: $24,500 (up from $23,500 in 2025)
- Catch-up contribution (age 50+): $8,000
- Super Catch-up contribution (ages 60-63): $11,250
If you're self-employed, you're wearing both hats, employee and employer, which means you can contribute as an "employee" (up to $24,500 in 2026) and then add profit-sharing contributions as the "employer" (up to a combined total of $72,000, or $80,000 if you're 50+, or $83,250 if you're 60-63).
That's a whole lot of tax-deferred (or Roth) savings. And it's not just about this year, getting your plan established now means you're ready to max out 2026 contributions all year long.
🎯 Penny Pro-Tip: The New Roth Catch-Up Rule for High Earners
Alright, this is a big one. Starting in 2026, there's a new mandatory Roth catch-up rule that affects high earners. If you're not paying attention, you could get caught off guard come tax time. Here's the simple logic tree to figure out if this applies to you:
Step 1: Did you make $150,000 or more on your W-2 in 2025?
Step 2: Are you age 50 or older?
Step 3: Do you plan to defer more than the maximum of $24,500 in 2026 and make a catch-up contribution?
If you answered "yes" to all three, here's the deal: Your catch-up contribution ($8,000) or super catch-up contribution ($11,250 if you're ages 60-63) must be made on a Roth basis in 2026. No more traditional pre-tax catch-ups for high earners.
What Does That Mean?
- Your first $24,500? You can still choose traditional (pre-tax) or Roth.
- But that extra catch-up amount? It's Roth-only if you hit the income threshold.
This is a huge change, and it means planning ahead. Roth contributions go in after-tax, so they won't reduce your taxable income in 2026: but they'll grow tax-deferred and come out tax-free in retirement. It's all about playing the long game.
Pro move: If you're establishing your Solo 401(k) right now for 2025, make sure your plan document allows for Roth contributions so you're ready when 2026 rolls around. Not all plans automatically include this feature, so confirm it with your provider.
Real Talk: Why Solo Owners Skip This (And Shouldn't)
I get it. You're juggling a million things as a solo business owner. The idea of setting up a retirement plan probably feels like just another administrative headache. But here's the reality check:
- It's shockingly easy. A Solo 401(k) can be established in an afternoon with the right provider. We're talking paperwork that takes less time than your average Netflix episode.
- The tax savings are immediate. Between the $500 credit and the ability to defer income, you're looking at thousands of dollars in savings: money that stays in your pocket (or rather, your retirement account).
- You're not getting any younger. If retirement feels like a distant concept, do some quick math: every year you wait is a year of compounding growth you're leaving on the table. And compounding? That's the closest thing to financial magic you'll ever experience.
The "Last Call" Action Plan
Here's your step-by-step game plan to seize this opportunity before it's gone:
Before Your 2025 Tax Deadline:
- Establish your Solo 401(k) plan. Choose a provider (like Castle Rock PEP: shameless plug) and get your plan documents signed.
- Make your 2025 contributions. You have until your tax filing deadline to contribute for 2025.
- Claim the $500 credit. File Form 8881 with your 2025 tax return to grab that credit.
For 2026 Planning:
- Confirm Roth availability. Make sure your plan allows Roth contributions so you're ready if the new catch-up rule applies to you.
- Set your contribution strategy. Decide how much you want to defer in 2026 and whether you'll go traditional, Roth, or a mix.
- Automate if possible. Set up recurring contributions so you're consistently funding your future without thinking about it.
Why Castle Rock PEP Gets It
Look, I'm biased: I work here. But here's the truth: Castle Rock PEP exists because we've seen too many small business owners and solo entrepreneurs skip retirement planning because it feels too complicated or expensive.
With a pooled employer plan (PEP), you get institutional-level benefits, fiduciary support, and a team that actually answers the phone when you have questions. And if you're a solo operator? A Solo 401(k) through our platform means you get all the flexibility you need without the overwhelm.
We're in the business of making retirement planning simple, accessible, and: dare I say it: even a little bit fun. Because when you're building something amazing as a business owner, you deserve a retirement plan that works as hard as you do.
The Bottom Line
You've got a rare and fleeting opportunity sitting in front of you right now: the ability to claim a $500 tax credit, make retroactive contributions for 2025, and set yourself up for serious tax savings in 2026 and beyond.
But here's the thing: time is not on your side. Once your tax filing deadline passes, this window closes. The 2025 credit? Gone. The chance to reduce your 2025 taxable income? Done.
So here's my challenge to you: Don't be the person who looks back in six months and says, "I should've done that." Take an hour this week, establish your plan, and start building the retirement you actually want.
Because we're not letting you leave a penny on the table. Not on our watch.
Ready to get started? Reach out to the Castle Rock PEP team or schedule your "PEP Talk" today. Your future self will thank you.
Simplifying retirement for all. One plan. Every business.