Author Topic: Need Math Help for Max Non-Deductible Contributions I can Make to 401k  (Read 209 times)

DavidAnnArbor

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I need someone to review my numbers to understand what space I have available from the business income for making non-deductible contributions to my Individual 401k plan for the purposes of the megabackdoor roth rollover.
Iím going to use my 2016 income tax information so as to educate myself about what my potential is because my 2017 income will be roughly similar.
Sole Proprietor schedule C business income.
*Age is above 50 so I can do employee catch-up of $6,000 on top of the $18,000 max for salary deferral. The employer deduction is maxed out too.

"2016 Income tax statement"
Wages:              7,716
Interest Income:    1,067
Dividend Income:  14,448
Taxable refunds:    887
Business Income:  55,849
Capital Gain:      499
Total:           80,466
Deductions/Exemptions:         
Health Savings Account:            3,350
Deductible Part of SE tax:         3,946
Qualified Plan/solo 401k*:        34,381
Health Insurance Deduction :      1,161
IRA Deduction:                    6,500
Adjusted Gross Income:           31,128       


Calculate how much is available for non-deductible contributions to my Solo 401k plan

Business Income:                  $55,849
Earned business deductions:
Deductible Part of SE tax:         3,946
Qualified Plan/solo 401k*:        34,381
Health Insurance Deduction :       1,161 
Max non-deductible contribution:  $16,361



DavidAnnArbor

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Re: Need Math Help for Max Non-Deductible Contributions I can Make to 401k
« Reply #1 on: September 25, 2017, 10:51:21 AM »
To show how my deductible Solo 401k contribution number was calculated.

Maximum you can deduct as an employer deduction                  
Worksheet from Publication 560               
Step 1   Net profit from Schedule C line 31            55849   
Step 2    Subtract deductible part of SE Tax            -3946   
Step 3   Net earnings from self-employment            51903   
Step 4   Enter your rate, the maximum            0.2   Maximum allowed
Step 5   Multiply step 3 by step 4                           10381   
Step 6   Multiply 265,000 by plan contribution rate         66250   
Step 7   Enter the smaller of step 5 and step 6            10381   
Step 8   Contribution limit for 2016                            53000   
Step 9   Allowable elective deferrals made                    18000   
Step 10   Subtract step 9 from step 8                            35000   
Step 11   Subtract step 9 from step 3                            33903   
Step 12   Enter 1/2 of step 11                                     16952   
Step 13   Enter the smallest of step 7,10, or 12             10381   
Step 14   Subtract step 13 from step 3                    41523   
Step 15   Enter the smaller of step 9 or step 14            18000   
Step 16   Subtract step 15 from step 14                    23523   
Step 17   Enter catch-up contributions made            6000   
Step 18   Enter the smaller of step 16 or step 17            6000   
Step 19   Add steps 13, 15, and 18                            34381   

DavidAnnArbor

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Re: Need Math Help for Max Non-Deductible Contributions I can Make to 401k
« Reply #2 on: September 25, 2017, 08:21:31 PM »
Ok I got help from the Bogleheads.

Answer:

The health insurance deduction has nothing to do with it. It's a personal deduction, not a business expense. So the maximum non-deductible contribution would be 55849 - 3946 - 34381 = 17522.