Solo 401k Scenario - Any advantage?

[Cadman]

I've done some searching but haven't found a good answer yet.

Here's the situation: DW is recently FIRE'd, while I'll continue to work the next couple of years. On the side, we have farmland enrolled in CRP which generates an annual payment of around $15k which requires us to submit Schedule F and SE. For tax purposes, we consider ourselves a sole proprietorship with my SSN tied to the F and SE forms. No ETN.

What I'm wondering, is for next year now that DW is out of the corporate world, could she open a Solo 401k and act as employer of the proprietorship? I assume her SSN would need be tied to forms F and SE from that point on.

I assume she'd be limited to investing only 15k less SS/Medicare tax?

Is this worth doing at all??

[terran]

According to https://www.mysolo401k.net/farm-income-setting-solo-401k/ schedule F income is eligible for contribution to a solo 401(k). It sounds like the bigger issue is that the schedule F income is under your SSN and not your wife's.

[Cadman]

According to https://www.mysolo401k.net/farm-income-setting-solo-401k/ schedule F income is eligible for contribution to a solo 401(k). It sounds like the bigger issue is that the schedule F income is under your SSN and not your wife's.

Getting that changed over would definitely be step #1 ; ) - Appreciate the link.

[dandarc]

Whether it is worth doing depends on your tax situation. But yeah, you'd be able to shelter essentially all of that farm income.

If your tax rate is already low, you might consider a Roth SoloK - another 14K-ish/year of Roth money is pretty good. If your income is high, probably traditional is the way to go.

For this tax year, you need to get the 401K established before 12/31. You technically have until your tax filing deadline to fund it, but it is probably best to do at least the employee contributions before 12/31 as well.