Retirement Plans for Pet Grooming Business Owners: Solo 401(k) and Plans with Bathers

By Yarik Yarosh, CPA ·September 5, 2026 ·Updated September 23, 2026 ·6 min read

Written by Yarik Yarosh, CPA (US & Canada) September 5, 2026 · FL CPA license AC61704 · CPA Ontario

Pet grooming businesses are not SSTBs, so the QBI deduction is available at all income levels. Retirement contributions reduce taxable income and provide long-term savings, and for groomers earning $60,000-$120,000 in net profit, the Solo 401(k) can shelter $30,000-$50,000 per year. Once the grooming shop hires bathers, assistants, or additional groomers as W-2 employees, the Solo 401(k) is unavailable and the owner must choose a plan that includes those employees.

✓Key takeaway

A solo groomer (no employees other than a spouse) uses the Solo 401(k): $24,500 employee deferral plus 20% of net SE income (or 25% of W-2 salary for S-Corp), up to $72,000 combined. A grooming shop with employees uses a SIMPLE IRA (lower deferral, lower employer cost) or Safe Harbor 401(k) (higher deferral, higher employer cost). The SIMPLE IRA is often the best fit for grooming shops with 1-3 employees because the mandatory employer match (up to 3% of compensation) is modest for lower-paid bathers ($25,000-$35,000/year), and many part-time bathers never enroll (reducing the actual cost). The grooming industry’s relatively low wages and moderate turnover make the SIMPLE IRA’s cost structure attractive compared to the Safe Harbor 401(k)‘s mandatory 3% non-elective contribution on all eligible employees.

How much can a solo groomer contribute?

Hypothetical example

Round numbers. For current guidance, see IRS Retirement Plans for Small Business. A solo pet groomer earns $80,000 in net self-employment income (after the SE adjustment, the calculation base is approximately $74,280).

Solo 401(k):

Employee deferral: $24,500
Employer contribution: 20% of $74,280 = $14,856
Total: $39,356

Tax savings at 22% marginal rate: approximately $8,658. The $39,356 contribution reduces the groomer’s taxable income from $80,000 to approximately $40,644 (after standard deduction), dropping them into the 12% bracket on most of their remaining income.

With S-Corp ($42,000 salary):

Employee deferral: $24,500
Employer contribution: 25% of $42,000 = $10,500
Total: $35,000

The sole proprietor Solo 401(k) actually allows a higher total contribution than the S-Corp in this case because the employer contribution base (20% of net SE income) is larger than 25% of the S-Corp salary. The S-Corp still saves on SE tax, and the combined S-Corp + Solo 401(k) benefit may exceed the sole proprietor + Solo 401(k) benefit depending on the specific numbers.

Illustrative numbers only, not a real client and not advice for your facts.

What about a grooming shop with bathers?

A grooming shop that hires bathers (assistants who wash, dry, and prep dogs before the groomer does the styling) has W-2 employees. Bathers typically earn $28,000-$38,000/year and have moderate turnover.

SIMPLE IRA for a shop with 2 bathers:

Owner deferral: $18,100 (2026 higher limit for an employer with 25 or fewer employees)
Owner match (3% of $80,000 net): $2,400
Bather matches (assuming 1 of 2 enrolls, 3% match on $30,000): $900
Total employer cost: $3,300
Owner total contribution: $20,500

The $20,500 total is lower than the Solo 401(k)‘s $39,356, but the trade-off is having employees who help the owner groom more dogs per day (and earn more revenue). The retirement plan cost ($3,300) is modest compared to the additional revenue the bathers generate.

Related guides:

Pet Grooming Entity Structure Scorp
Pet Grooming Estimated Taxes Tips
Pet Grooming Service Deductions Expenses
Pet Grooming Worker Classification Bathers

When is the deadline to set up and fund a retirement plan for tax purposes?

Setup and funding deadlines vary by plan type. A SEP-IRA can be established and funded up to the tax filing deadline including extensions (October 15, 2026 for a sole proprietor who extends a 2025 return; an S corporation follows its own return’s due date). A solo 401(k) doesn’t have to be established by December 31: a plan adopted by the filing deadline, including extensions, can be treated as in place for the prior year, and employer contributions can be made until that deadline. Employee deferrals in an existing plan must be elected by December 31 (an S corporation owner’s come out of paychecks, so the election has to be in before the last one of the year); a sole proprietor can then deposit them by the filing deadline including extensions. In a plan adopted after year-end, first-year deferrals are open only to an unincorporated owner who is the business’s only employee, and the plan and the deferrals must be in by the unextended due date (April 15, 2026 for 2025). A SIMPLE IRA must be established by October 1 of the tax year. A defined benefit or cash balance plan can also be adopted up to the filing deadline including extensions, and its minimum required contribution is due 8.5 months after the plan year ends.

How do retirement deadlines differ for a groomer with an S corp?

A groomer’s deadlines depend on how the shop files. As a sole proprietor, SEP and Solo 401(k) employer contributions for 2025 can go in until October 15, 2026 with a Form 4868 extension. As an S corporation, they follow the 1120-S, due March 16, 2026 for 2025, or later if you extend with Form 7004.

The first-year rules differ too. A sole proprietor groomer with no employees, spouse included, can adopt a Solo 401(k) after year-end and still make 2025 deferrals by April 15, 2026. An S corp can adopt a plan after year-end for employer contributions, but not for prior-year salary deferrals.

A shop with bathers on a SIMPLE IRA has to make it effective by October 1. Bather deferrals go in no later than 30 days after the end of the month they’re withheld, and the match is due by the extended return date.
A shop with 25 or fewer employees who earned at least $5,000 the prior year gets the higher SIMPLE limit: $17,600 for 2025 and $18,100 for 2026.

What if I can only contribute a small amount to my retirement plan this year?

Any contribution is better than none, and most plans have no minimum contribution requirement. A traditional or Roth IRA allows contributions as low as $1 up to the annual limit ($7,000 in 2024). A solo 401(k) has no minimum for either the employee deferral or employer contribution, so you can contribute $100 in a slow year and $69,000 (the 2024 cap) in a strong one. SEP-IRAs similarly have no minimum. The flexibility to vary contributions is one of the biggest advantages of self-employed retirement plans. Even small contributions benefit from compounding over time: $200 per month starting at age 30, growing at 7% annually, reaches approximately $227,000 by age 60. If cash flow is tight, prioritize contributions to a Roth IRA since the tax-free growth is most valuable when started early with small amounts.

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Cite this page

Yarik Yarosh, CPA. "Retirement Plans for Pet Grooming Business Owners: Solo 401(k) and Plans with Bathers." Blue Cloud CPA, September 5, 2026, updated September 23, 2026. https://bluecloudcpa.com/guides/pet-grooming-retirement-plans

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.