Straight from the
IRS's website:
Contribution limits in a one-participant 401(k) plan
The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both:
- Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit: $18,000 in 2015 and 2016, or $24,000 in 2015 and 2016 if age 50 or over; plus
- Employer nonelective contributions up to 25% of compensation as defined by the plan, or
for self-employed individuals, see discussion below
If you make $5,000 you can contribute $5,000. If you make $20,000 you can contribute $20,000 ($18,000 elective deferral + $2,000 non-elective deferral to hit 100% compensation). The math only gets interesting once you get above $24,000.