Need advice on optimizing taxes for 2015

[scown]

All (I think) necessary information for 2015 income:

Total compensation	$365,000
My W2 income	$300,000
My 1099 income	$35,000	* can be upped to $55,000
Spouse's 1099 income	$30,000

Neither of us are covered by employer health insurance, we have a HDHP, and neither are covered by an employer retirement plan.  We rent and don't have kids.

The current plan of action:

• Max Solo 401k for myself ($18,000 + 20% of 35k - 55k)
• Max Solo 401k for spouse ($18,000 + 20% of 30k)
• Contribute max to HSA for both of us ($6,650)

Is spouse's eligibility for tIRA deduction based on combined income?  If it is I'm assuming that we should backdoor Roth.  Spouse doesn't have a tIRA.
Thoughts on a backdoor Roth for myself if I have a tIRA with $5,500?  I'm calculating $1,815 in additional taxes if I convert (just 33% * 5,500).  I might be calculating this wrong.
For my Solo 401k, is the limit based off of 1099 income or total compensation?  I'm assuming the 1099 income, though maybe using the W2 income is allowed due to no employer plan?

After that I'm out of ideas.  Any help would be greatly appreciated.

[MDM]

scown, welcome to the forum.

Is spouse's eligibility for tIRA deduction based on combined income?

Yes.

Thoughts on a backdoor Roth for myself if I have a tIRA with $5,500?

Do you think that is a deductible tIRA?  See http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits.

Don't know about the Solo 401k limits.

[seattlecyclone]

Look into whether you can roll your tIRA into your solo 401(k) plan. That would avoid the cost of converting that sum to Roth. However even if you do have to convert to Roth, that cost may be worthwhile if it enables you to stash away $5.5k in a Roth every year until you retire.

The solo 401(k) limits are based on your self-employment income only. The W-2 income doesn't qualify. Any chance you could get your employer to offer a 401(k)?

It sounds like you're aware of pretty much everything you can do to reduce your taxes. The solo 401(k)s, backdoor Roths, and HSA are the biggest opportunities.

[Gin1984]

Maybe you mistyped or I am doing my math wrong but 20% of $35000 is $7000 + 18000= $25000 not $55000 (at least according to my math).

[MDM]

Thoughts on a backdoor Roth for myself if I have a tIRA with $5,500?

Do you think that is a deductible tIRA?  See http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits.

I may have misread that your statement meant a tIRA you contributed to for this year - does it?  Or do you mean a tIRA you established long ago (when you had much lower income) has grown and coincidentally now has ~the amount of the allowable annual contribution?

[scown]

scown, welcome to the forum.

Thanks!  Long time lurker and mustachian-in-training (we save over 50% but with our income I'd really like it to be higher, but that's a different thread).

Do you think that is a deductible tIRA?  See http://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits.

I may have misread that your statement meant a tIRA you contributed to for this year - does it?  Or do you mean a tIRA you established long ago (when you had much lower income) has grown and coincidentally now has ~the amount of the allowable annual contribution?

I should have clarified this.  I have a previously existing tIRA from last year with $5,500 in it.  I have not contributed this year.  For this year I'm thinking I'd put $5,500 after tax into a tIRA and then convert to Roth.  If I'm not mistaken, though, doing this would force all tIRAs to get converted to Roth and I'd have to pay tax on $5,500 from last year.

Look into whether you can roll your tIRA into your solo 401(k) plan. That would avoid the cost of converting that sum to Roth. However even if you do have to convert to Roth, that cost may be worthwhile if it enables you to stash away $5.5k in a Roth every year until you retire.

The solo 401(k) limits are based on your self-employment income only. The W-2 income doesn't qualify. Any chance you could get your employer to offer a 401(k)?

No chance on the 401(k) this year with the current employer.  I can probably swing it next year if I lobby hard enough.  Thank you for the tIRA roll over into solo 401(k) idea, I'll definitely look into it.

Maybe you mistyped or I am doing my math wrong but 20% of $35000 is $7000 + 18000= $25000 not $55000 (at least according to my math).

My bad on this one.  I was meaning to point out that I could up my 1099 income this year from $35,000 to $55,000 in order to get a higher 401(k) contribution.  By my math, taking the additional $20k this year would mean $4,000 (20% of $20,000) more into the solo 401(k) but I'd pay $5,280 (33% of $16,000) more in taxes.  Still not sure if it's the right thing to do.  The other option is to take the $20k next year when my income is set to be about half of this year's.

Thank you all for the feedback.

[MDM]

I should have clarified this.  I have a previously existing tIRA from last year with $5,500 in it.  I have not contributed this year.  For this year I'm thinking I'd put $5,500 after tax into a tIRA and then convert to Roth.  If I'm not mistaken, though, doing this would force all tIRAs to get converted to Roth and I'd have to pay tax on $5,500 from last year.

Ok, I have to ask: did you actually go from being eligible for a deductible tIRA (i.e., having less than $98K MAGI if married) in 2014 to having $300K W-2 income in 2015?  Has to be a good story there if so. :)

[Gin1984]

Since you clarified, I'd push the money off to 2016.

[scown]

Since you clarified, I'd push the money off to 2016.

Gotcha, will probably do that.

Ok, I have to ask: did you actually go from being eligible for a deductible tIRA (i.e., having less than $98K MAGI if married) in 2014 to having $300K W-2 income in 2015?  Has to be a good story there if so. :)

Err, don't know if it's interesting but here it is.  I didn't work for around 4 months last year (was taking some time off) and ended up with a 56k AGI (wasn't married), so I deducted 5.5k for the tIRA.  Around 4 months into last year I got picked up by a company doing some contract work and then got brought on as a W2 employee earlier this year.  Company cashed out and I got a very nice bonus check from the old owners, and now work for the new owners.  I also do a good bit of side work, hence the 1099 stuff.  Nothing skillful on my part for the extra money this year, though, just blind luck.  And that's what lead me to the boards: I really wanted to keep as much of the money, and pay as little in tax, as possible. :)

Thanks again for the feedback.