Lettuce
Most solopreneurs aren't leaving money on the table because they aren't working hard enough. They're leaving it there because no one ever told them what they were doing wrong.
At Lettuce's recent Solo Summit, Ankur Nagpal — founder of Carry and Silly Money — walked through the moves that quietly cost self-employed people thousands every year. "The single best thing you can do in this country to save money on taxes is to start your own business," he said. The catch, he explained, is that most people never learn how to actually put that advantage to work.
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Take Quiz7 Solopreneur Mistakes That Add Up
Being self-employed comes with more tax advantages than most people realize, but only if you know how to use them. Most solopreneurs don't. Here are the mistakes Ankur flagged at Solo Summit, and what to do instead.
Mistake #1: Not Thinking of Yourself as a Business Owner
Before any tactic, Ankur pointed to a mindset problem. When you're a W-2 employee, your tax situation is mostly out of your hands. Taxes are withheld from every paycheck, and there's very little you can do about it. The moment you start working for yourself, that changes. But too many solos keep thinking like employees.
As Lettuce's Lisa put it during the session: "This isn't snake oil, and it isn't hidden. It's things we just aren't educated about, but the tax code is built to benefit solos." The advantages fall into roughly four buckets: how you incorporate, the everyday expenses you can now deduct, the benefits you get to choose for yourself, and a set of bonus loopholes the tax code reserves for business owners.
The first fix is mental: start treating yourself not just as an individual, but as a business owner. Everything else follows from that.
Mistake #2: Staying an LLC and Overpaying Self-Employment Tax
When you're self-employed, you pay self-employment tax, which covers Social Security and Medicare, of up to roughly 15% on your income. On $100,000, that's about $15,000 before you even get to income tax.
An S Corp can soften that hit significantly, and Ankur was quick to clear up a common misconception: an S Corp usually isn't a different kind of business. "It can be literally a tax election," he explained, meaning a form telling the IRS to tax your existing LLC as an S Corp.
Once you make that election, your income splits into two buckets. Say you net $120,000: you pay yourself a fair-market W-2 salary (say $60,000) and take the remaining $60,000 as profit distributions. You owe regular income tax on both, but you skip self-employment tax on the distribution half. At around $100,000 of net income, that can save roughly $5,000 a year, and the savings grow as your income does.
The fix isn't just making the election, though. It's making it correctly. Some states treat S Corps unfavorably. Ankur flagged New York City and Tennessee specifically. If your income is inconsistent, it's worth waiting until you're confident you'll stay above the threshold. "Work with someone who knows what they're doing," he said, "so you don't accidentally make your situation worse."
Do This Next: If your net income is anywhere near the $70,000 to $100,000 range, don't guess. Model it. Run your numbers through Lettuce's tax calculator to see roughly how much an S Corp election could save you.
Mistake #3: Setting Up an S Corp Without an Accountable Plan
This one caught a lot of people in the chat off guard. An accountable plan is the legal document an S Corp needs to reimburse you tax-free for expenses you've personally paid, like your home office. Without it, those reimbursements don't hold up.
"A lot of solos have never heard of it," Ankur said. It's a relatively simple document, and software providers like Lettuce can help you set it up. Skipping it means leaving a clean, legitimate deduction on the table.
Mistake #4: Defaulting to a SEP IRA Instead of a Solo 401(k)
Only about 21% of solos use a solo 401(k), which Ankur called a shame, because he considers it the single most tax-advantaged account in America today. Most people default to a SEP IRA based on outdated advice, but that advice hasn't kept pace with technology.
The solo 401(k) lets you contribute more than double what a SEP allows at the same income level. At $100,000, you might put about $20,000 into a SEP IRA, versus roughly $43,500 into a solo 401(k) in 2025, thanks to both employer and employee contribution buckets. And if you hire your spouse, the 2025 contribution limit rises to $140,000, assuming the income supports it.
It also beats the SEP IRA on almost every other dimension: it supports Roth contributions, participant loans of up to $50,000, a $500 tax credit for setting one up, and the mega backdoor Roth strategy, none of which a SEP IRA offers. There's also no vesting schedule. It's your money the moment it goes in.
The old knock was that solo 401(k)s were painful and expensive to administer. Technology has largely solved that. Carry, now under the Lettuce umbrella, starts at $299/year. One more myth Ankur addressed: you don't need an S Corp to open one. You can do it as an LLC, or even with just your Social Security number, as long as you don't have full-time employees beyond a spouse or co-owner.
Do This Next: If you've got an old employer 401(k) sitting around, you can roll it into a solo 401(k) for more investment flexibility. If you've been defaulting to a SEP IRA, it's worth pricing out the switch. Just avoid contributing to both in the same year.
Mistake #5: Missing Everyday Deductions and Business Benefits
Beyond structure and retirement accounts, Ankur walked through a handful of business-owner perks that quietly add up. The caveat across all of them: document everything, and only claim it for legitimate business reasons.
Here is what most solopreneurs miss:
Home office and vehicle. If you work from home or drive for work, these are among the biggest everyday deductions available to a business owner.
Health insurance. As a business owner, you get to choose your own benefit plan, including the health insurance that saves you the most.
Credit card points. They sound gimmicky, but Ankur treats them as a genuinely powerful untaxed benefit, especially if you put them toward travel.
The Augusta Rule. With an S Corp or a partnership, you can rent your home to your business for a legitimate purpose, such as a meeting, retreat, or offsite, for up to 14 days a year and pay no tax on that rental income. It has to be real and documented. "This is not tax fraud," Ankur said. "You have to document this."
Hiring your kids. If your children are old enough to do legitimate work, paying them up to the standard deduction is effectively tax-free to them and lowers your taxable income. It also makes them eligible to open a Roth IRA in their own name, allowing that money to compound for decades.
“Trump accounts.” As a business owner, you can contribute $2,500 per child per year pre-tax, and the account can be converted to a Roth IRA in your kid's name at 18. These accounts are open to every child under 18, not just newborns.
Mistake #6: Parking Idle Cash in the Wrong Place
This one is for solos already earning well into six figures. Ankur's take: Leaving cash in a checking account is the worst thing you can do. A high-yield savings account is better, but still not optimal if you're in a high tax bracket.
The move he recommends is a tax-advantaged money market fund, specifically a Treasury or muni fund. These deliver a comparable and often better yield than a HYSA, but skip state and sometimes federal taxes on the interest.
In a high-tax state like New York or California, that difference meaningfully lifts your after-tax return. As always, he flagged this as general information, not investment advice.
Mistake #7: Optimizing Taxes Before You've Built the Business
After a session packed with strategies, Ankur's number-one takeaway was, by his own admission, almost the opposite of everything else. "If you're making less than $100,000, ignore most of it," he said. "Your job is to work on building the best possible business." Tax optimization is a second-order problem. Build something worth optimizing first.
A Closer Look at the Solo 401(k)
The solo 401(k) came up enough during the session that it deserves more detail. Because it's exclusively your plan, you can set it up exactly the way you want. Here is what makes the 2025 solo 401(k) stand out.
The contribution limit is up to $70,000 in 2025, and up to $140,000 if you hire your spouse and the income supports it. You can invest in almost any asset you want, not just the limited menu of a workplace 401(k). Growth inside the account is tax-free, and you have the option to make Roth contributions. You can borrow up to $50,000 from your account at any time, for any reason. And you can get a $500 tax credit just for setting one up.
The mega backdoor Roth is one of the most powerful features. Normally, high earners are phased out of contributing to a Roth IRA. Once you're over roughly $160,000 as an individual, you can't contribute directly. The mega backdoor Roth uses the solo 401(k) as a conduit to fund your Roth IRA anyway, effectively letting you contribute up to $70,000 a year to a Roth instead of the standard $7,500 limit.
"This is definitely an advanced strategy," Ankur said, "but it's a pretty crazy loophole for the right person."
Two More Moves for Higher Earners
For solos already earning well into the six figures, Ankur shared two strategies he uses himself:
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Park idle cash smarter. A tax-advantaged money market fund, such as a Treasury or muni fund, delivers a comparable yield to a high-yield savings account while skipping state and, sometimes, federal taxes on the interest. In high-tax states like New York or California, that meaningfully lifts your after-tax return.
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Consider direct indexing. Instead of buying a single index fund, direct indexing software buys all the underlying positions individually and harvests losses along the way, generating capital losses you can use to offset gains elsewhere, while still tracking the index closely.
As always, he flagged both as general information, not investment advice.
Tax Mistakes: Frequently Asked Questions (FAQs)
These are some of the questions that came up live during the session, answered directly from the conversation.
Do I need an S Corp to open a solo 401(k)?
No. You can open a solo 401(k) as an LLC, or even with just your Social Security number. The main requirement is that you have no full-time W-2 employees other than a spouse or co-owner.
Can I roll over an old employer 401(k) into a solo 401(k)?
Yes. You can roll over most retirement plans into a solo 401(k), which gives you more investment flexibility than most employer plans offer.
I've been contributing to a SEP IRA. Can I switch to a solo 401(k)?
Generally yes. Set up the solo 401(k) and move your dollars over. Just avoid contributing to both in the same calendar year.
At what income does the pass-through entity tax (PTET) start to make sense?
If you're in a high-tax state like California, New York, New Jersey, or Massachusetts, an S Corp can unlock PTET, a workaround that makes more of your state tax deductible at the federal level. Once you're over $600,000, the federal cap limits your state tax deduction to $10,000, making PTET clearly worth modeling. Under that threshold, run the numbers with your tax advisor.
Are “Trump accounts” only for newborns?
No, this is a common misconception. Trump accounts are open to every child under 18 in America. Only the free $1,000 government contribution is limited to children born between 2025 and 2029.
The Takeaway
The tax code was built to benefit business owners, but only the ones who know how to use it. The strategies Ankur covered at Solo Summit aren't loopholes in the shadowy sense. They're tools that have been sitting there all along, waiting for someone to pick them up. The point isn't the optimization itself. Building something you're proud of gives you the freedom to live the life you want. Get there first, then put these tools to work.
Learn more by watching Ankur’s full session or check out the complete Solo Summit video library to get more insights from the other experts at Solo Summit.