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Learning, Sharing, and Teaching => Taxes => Topic started by: DavidAnnArbor on September 25, 2017, 10:41:46 AM
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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.
I’m 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
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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
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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.