Retirement Plans for Coaches: The Solo 401(k), the Defined Benefit Plan, and the Contribution That Saves the QBI Deduction

The coach's retirement plan is a tax instrument first and a savings vehicle second, because of a phase-out that most trades never meet. The menu for a solo coach (the bookkeeping practice retirement guide lays out the mechanics; the coach's version has the same tools and higher income). The Solo 401(k): employee deferrals up to the annual limit (US$24,500 for 2026, plus an US$8,000 catch-up for those fifty and over, and US$11,250 for those in the 60-to-63 band) and employer contributions of 20% of net profit (Schedule C) or 25% of W-2 salary (S corporation), within the overall annual additions limit; a Roth option for the deferrals (and, under recent law, for employer contributions where the plan allows); loan provisions in many plans; Form 5500-EZ once assets exceed the threshold; established by December 31 for the year's deferrals, employer contributions by the return deadline — the plan with the most room below the defined benefit tier, and the default for a coach netting into the low-to-mid six figures. The SEP IRA: 20% of net profit or 25% of salary, no deferral, no filing, established by the extended return deadline — less room than the Solo 401(k) at the same income, right for a coach who wants the simplest possible plan or who missed the December 31 deadline for a Solo 401(k) (the SEP can be established and funded by the extended return date for the prior year). The defined benefit or cash balance plan: for a coach over fifty with a stable, high income who wants to contribute far beyond the defined contribution limits — an actuarially determined annual contribution (based on age, income, and the target benefit) that can reach US$100,000 to US$300,000 a year for an older high-earner, deductible in full, with the trade-offs of a required annual funding commitment (the contribution isn't optional in a lean year — the plan can be designed with flexibility but not eliminated), actuarial and administration costs (several thousand dollars a year), the Form 5500, and the obligation to cover eligible employees (a solo coach has none — which is why the plan suits the solo practice and complicates the one with a team); paired with a Solo 401(k) (the combination allows both plans' contributions within the combined limits), the defined benefit plan is how a coach netting US$400,000 shelters a large share of it. The threshold arithmetic — the coach's reason (the coaching entity guide covers the classification): most coaching is a specified service trade, so the QBI deduction is full below the taxable-income threshold, partial through the phase-out range (US$201,750 to US$276,750 single, US$403,500 to US$553,500 joint for 2026, widened and made permanent by the 2025 law), and zero above it — and a retirement contribution reduces taxable income dollar for dollar, so a coach whose taxable income would land in the range can contribute enough to land below the threshold and save both the contribution's own tax (at the marginal rate) and the QBI deduction it rescues (20% of qualified business income, at the marginal rate); for a coach in the range, the combined saving on the contribution can approach or exceed the marginal rate plus the QBI effect — a return no investment produces — which is why the coach in the range funds the plan before any other year-end move. The computation, in order: projected taxable income before the contribution (all household income, after the standard or itemized deduction and the health insurance deduction); distance to the threshold (or into the range); the contribution needed to reach the threshold; the room available under the chosen plan (Solo 401(k) at the coach's compensation; the SEP's smaller room; the defined benefit plan's actuarial figure); the tax saved (marginal rate on the contribution plus 20% of QBI restored at the marginal rate); the cash available; and the plan that fits — Solo 401(k) for most, the defined benefit plan where the room needed exceeds it and the income supports the commitment. The S corporation interaction: an S corporation coach's plan contributions are based on W-2 salary (25% for the employer contribution; deferrals from salary) — a low salary limits the room, pulling toward a higher salary where retirement room matters (against the payroll-tax saving that pulls toward a lower one), and the wage limitation above the threshold (the entity guide) pulls the same way; the salary decision and the retirement decision are one worksheet. The non-SSTB coach (courses and training — the digital products guide's classification): a coach whose business is classified as non-SSTB has no phase-out to plan around, and the retirement contribution is a straightforward deduction — but above the threshold the wage limitation applies, and the S election's salary is the lever; the retirement contribution's value is its own tax saving, still substantial at the coach's marginal rate. The team interaction: a coach who has hired employees (a community manager, associate coaches — the classification guides) has a coverage obligation — the Solo 401(k) ends when an eligible employee exists (the cleaning retirement guide covers the transition), and the plan becomes a small-employer 401(k) with coverage (a safe-harbor design to avoid testing), a SIMPLE IRA, or a defined benefit plan that covers the team (expensive); the startup and employer contribution credits (the daycare center retirement guide) offset the cost for a coach with a small team. The Roth question: a coach in a high bracket now who expects a lower one in retirement takes the deduction (traditional); one who expects the same or higher takes the Roth option on the deferrals — with the threshold strategy tilting toward traditional in the years the QBI rescue is in play (the Roth deferral doesn't reduce taxable income and doesn't move the coach below the threshold). The launch-year problem (the coaching estimated-tax guide): a coach whose income spikes in a launch year has a large contribution capacity and a large threshold problem in the same year — the Solo 401(k)'s employer contribution scales with the year's profit, and the defined benefit plan's contribution is set by the actuary on a multi-year income assumption (a spike year doesn't raise the required contribution, and a lean year doesn't lower it — the plan's stability is the coach's commitment). The deadlines: Solo 401(k) established by December 31 (deferrals) with employer contributions by the return deadline; SEP by the extended return deadline; defined benefit plans established by the return deadline (under recent law, a plan can be adopted for the prior year up to the return's due date) and funded on the actuarial schedule; and the November planning meeting is where the threshold computation is run with time to establish the Solo 401(k) before year-end.

Key takeaways

• The menu: Solo 401(k) (deferral plus 20%/25% employer contribution, Roth option, the default for six-figure coaches), SEP (simpler, less room, establishable by the extended return date), defined benefit or cash balance (six-figure contributions for older high-earners with stable income and no team — a funding commitment with actuarial costs).
• The threshold arithmetic is the coach's reason: as a specified service trade, the QBI deduction phases out above the threshold — a contribution that pulls taxable income below it saves its own tax plus the QBI deduction it rescues.
• Run it in November: taxable income, distance to the threshold, contribution needed, room under each plan, combined saving, cash — then establish the Solo 401(k) by December 31.
• S corporation salary sets the room (25% of salary; deferrals from salary) — pulling toward a higher salary alongside the wage limitation; the salary and retirement decisions are one worksheet.
• Non-SSTB coaches (courses and training) have no phase-out but face the wage limitation above the threshold — the contribution is still a full-rate deduction.
• A team ends the Solo 401(k) — a small-employer 401(k), SIMPLE, or a defined benefit plan covering the team, with the startup and contribution credits offsetting the cost.

The coach's November threshold computation

Projected taxable income (household, after deductions). QBI threshold and range for the filing status; classification (SSTB or not). Distance to the threshold. Contribution needed. Room: Solo 401(k) (deferral + catch-up + employer at the coach's compensation) vs SEP vs defined benefit (actuarial). Tax saved: marginal rate × contribution + 20% of QBI restored × marginal rate. Cash available. Plan choice; establishment deadline. One page before December — and the year the coach crosses the threshold is the year the computation is worth more than any launch.

Worked example

A business coach (S corporation, single, age 54) nets US$290,000 — a US$110,000 salary and US$180,000 of distributions — with taxable income projected in the specified-service phase-out range, where her QBI deduction would be roughly a third of its full value. The November computation: the contribution needed to reach the threshold is about US$45,000; a Solo 401(k) allows the deferral plus the catch-up (about US$32,500 at her age — the US$24,500 deferral plus the US$8,000 catch-up) plus 25% of her US$110,000 salary (US$27,500) — about US$58,500 of room; she contributes US$46,000 (the deferral and catch-up by December 31, the employer portion by the return deadline): taxable income lands below the threshold, the full QBI deduction is restored (about US$36,000 of additional deduction), and the combined tax saving on the US$46,000 exceeds US$28,000 — her return on the contribution before it earns a dollar. Her colleague, age 57, netting US$420,000 with taxable income far above the range (no QBI deduction under any plan) and a stable income for a decade: a cash balance plan is adopted alongside a Solo 401(k) — the actuary sets a US$190,000 annual contribution on her age and income, deductible in full, with the funding commitment she accepts because her retainer base has been stable for eight years; the plans' administration costs several thousand dollars a year against a six-figure deduction. A third coach, whose income spiked in a launch year to US$310,000 from a US$150,000 base: the Solo 401(k)'s employer contribution scales with the year's profit and the threshold computation shows a contribution that pulls him below the line — but he had no plan established by December 31, so the SEP (establishable by the extended return date) is the only option, with less room; the contribution it allows still reaches the threshold this year, and the Solo 401(k) is established the following March for the years after. Three coaches, three plans — and the second one's actuary and the third one's December 31 deadline were the decisions that mattered.

Official sources

The IRS states that a one-participant 401(k) "is a traditional 401(k) plan covering a business owner with no employees, or that person and his or her spouse," allowing employee deferrals plus employer contributions, and that the plan "is generally required to file an annual report on Form 5500-EZ if it has $250,000 or more in assets at the end of the year." — Internal Revenue Service, One-participant 401(k) plans, https://www.irs.gov/retirement-plans/one-participant-401k-plans

The IRS states that "the deduction allows eligible taxpayers to deduct up to 20 percent of their QBI, plus 20 percent of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income," subject to limitations that depend on taxable income and the type of trade or business. — Internal Revenue Service, Qualified business income deduction, https://www.irs.gov/newsroom/qualified-business-income-deduction

Practitioner note

A coach's retirement contribution is a tax instrument before it's a savings vehicle, because most coaching is a specified service trade and the contribution that pulls taxable income below the threshold saves its own tax plus the QBI deduction the phase-out was taking. Our November computation runs the room under each plan against the distance to the line — the Solo 401(k) for most six-figure coaches, the cash balance plan for the older coach with a stable practice who wants six figures sheltered — and the one deadline we never let slip is December 31, because the coach without a plan established by then is choosing the SEP's smaller room in March.

See also: For related guidance, see tax deductions for coaches and the specified-service question; and browse every small business tax guide, by situation.

Next step

Fairlight handles retirement plan selection and funding for coaches — the November threshold computation against the specified-service phase-out, Solo 401(k) and SEP room at the coach's compensation, defined benefit and cash balance plan design for high earners, S corporation salary coordination, and plan transition when a team is hired. See pricing or book a call.