Retirement Plans for Interior Designers: Solo 401(k), UBIA From Equipment, and the SSTB Question
Solo interior designers (no employees other than a spouse) have access to the Solo 401(k), which provides the highest contribution limits and the most flexibility of any small business retirement plan. For designers whose business is classified as non-SSTB (because product procurement is a substantial portion of revenue), the retirement plan contributions interact favorably with the QBI deduction.
Solo 401(k) for interior designers:
- Employee deferral: $23,500 (2025)
- Employer contribution: 20% of net SE income (the effective rate for a self-employed owner)
- Combined maximum: $70,000
- Ages 60-63 super catch-up: additional $11,250
UBIA advantage: Interior designers who own design equipment (computers, printers, sample libraries), showroom fixtures, and delivery vehicles have Unadjusted Basis Immediately After Acquisition (UBIA) in qualified property. This UBIA supports the QBI deduction above the income threshold under the alternative limitation (25% of W-2 wages + 2.5% of UBIA). For non-SSTB designers, UBIA from a $50,000 showroom buildout provides $1,250 of additional QBI support annually (2.5% x $50,000).
The SSTB interaction: If the design business is classified as an SSTB (pure consulting, no product sales), the QBI deduction phases out above $266,950 (single) / $533,900 (MFJ). In that case, maximizing Solo 401(k) contributions becomes even more important because it’s the primary tax planning lever (retirement contributions reduce taxable income dollar-for-dollar, unlike QBI which provides only a 20% benefit).
How much can an interior designer contribute?
What about designers with employees?
Interior designers who hire assistants, junior designers, or showroom staff must transition from the Solo 401(k) to a plan that covers eligible employees. The SIMPLE IRA is the most common choice for small design firms (2-5 employees) because the 3% match is cheaper than a Safe Harbor 401(k) when most employees are lower-paid.
A design firm owner earning $150,000 with two junior designers earning $40,000 each:
- SIMPLE IRA employer match (3%): 3% x $40,000 x 2 = $2,400 total employer cost
- Owner’s SIMPLE contribution: $17,600 deferral (2025 higher limit for an employer with 25 or fewer employees) + 3% match = $22,100
Compared to the Solo 401(k)‘s $51,381 contribution, the SIMPLE IRA is a significant step down. This is one reason many design firm owners delay hiring employees or use contractors instead.
Related guides:
- Interior Design Deductions Trade Expenses
- Interior Design Entity Structure Scorp
- Interior Design Estimated Taxes
Should a high-earning interior designer consider a defined benefit plan?
A defined benefit (cash balance) plan can allow annual contributions well above $60,000, often exceeding $200,000 per year depending on age and plan design. This makes it the most powerful tax deferral tool for interior designers over 50 with consistent high income. The contribution is based on an actuarial calculation of the benefit you will receive at retirement, so older participants can contribute more because they have fewer years to fund the benefit. The downside is cost: annual actuarial certification, PBGC premiums (for plans with employees), and the commitment to fund the plan each year regardless of business performance. For solo practitioners or firms with only a few junior employees, a combination of a solo 401(k) plus a cash balance plan often maximizes contributions while keeping employee costs manageable.
Can an interior designer still open a plan for last year?
Yes, in most cases. A SEP can be set up and funded as late as your return due date with extensions, which for a 2025 sole proprietor filing Form 4868 is October 15, 2026. A solo designer with no employees, spouse included, can also adopt a Solo 401(k) after year-end, but first-year deferrals have to go in by April 15, 2026, with no extension.
The employer profit-sharing part of that new Solo 401(k) can wait until the extended date. A defined benefit plan can also be adopted after year-end, up to the extended due date, and treated as in place for 2025. Its minimum funding is then due 8.5 months after the plan year ends.
- A design firm that runs through an S corporation can’t use the after-year-end deferral option, and its deadlines follow its own return (March 16, 2026 for 2025, later if extended).
- A firm with junior designers that wants a SIMPLE IRA has to make it effective by October 1 of the year it starts.
Can I deduct contributions to a retirement plan if I have a loss year?
Retirement plan contributions are generally limited by net self-employment income, so a loss year means no SEP-IRA or solo 401(k) employer contribution is possible since those are based on a percentage of earned income. However, the solo 401(k) employee deferral (up to $23,000 in 2024) can be made as long as you had some compensation during the year, even if the business ultimately shows a loss. If you are an S-Corp owner, your contributions are based on your W-2 salary, not business profit, so you can still contribute even if the business is unprofitable, provided you drew a salary. Traditional IRA contributions ($7,000 in 2024, $8,000 if 50+) are not limited by business income but may not be deductible at higher AGI levels if you have an employer plan through a spouse. Planning for variable income years means choosing a plan type that gives you flexibility to contribute more in good years and less in lean ones.
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Yarik Yarosh, CPA. "Retirement Plans for Interior Designers: Solo 401(k), UBIA From Equipment, and the SSTB Question." Blue Cloud CPA, September 5, 2026, updated September 23, 2026. https://bluecloudcpa.com/guides/interior-design-retirement-plans
This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.