Author Topic: Solo 401k question  (Read 260 times)

dadof4

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Solo 401k question
« on: November 28, 2017, 04:50:30 PM »
I'd like to take advantage of a Solo 401k, but the maximum contribution language is a bit unclear to me.

Our situation:
1. I am employed, make most of the money in the household, and max out my company's 401k.
2. My wife works a few hours a week as a fitness instructor for 4 different gyms (they don't offer 401k plans). At a 5th, she is considered an independent contractor, where she makes about $2000 a year.

I usually make a maximum IRA contribution for her every year ($5.5K), but would a solo 401k allow me to contribute more? Is it capped at her business income ($2000) or at $18k if we consider joint income?

ixtap

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Re: Solo 401k question
« Reply #1 on: November 28, 2017, 05:13:19 PM »
It is capped by her business income, minus expenses such as business license, FICA, etc. However, it would allow you to put in all of her business income, then use yours for spousal IRA contributions.

dadof4

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Re: Solo 401k question
« Reply #2 on: November 28, 2017, 05:27:19 PM »
Hmm. That doesn't help me much then.

What if we put income generating assets as part of a shell business under her name?  They are currently just personal assets.
Is that something the IRS frowns upon?


seattlecyclone

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Re: Solo 401k question
« Reply #3 on: November 28, 2017, 05:49:27 PM »
I believe you can start a solo 401(k) under a sole proprietorship; no need to file any fancy paperwork to register her as a company.

The solo 401(k) would allow your wife to shelter the first $18k of her self-employment income after self-employment taxes. You couldn't add in other income, only her self-employment income counts. It would not affect the amount that you could contribute to an IRA in her name.
I made a blog! https://seattlecyclone.com/

The Roth IRA was named after William Roth, who represented Delaware in the US senate from 1971-2001. "Roth" is a name, not an acronym. There's no need to capitalize the final three letters.

Bojack

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Re: Solo 401k question
« Reply #4 on: November 29, 2017, 06:59:20 PM »
Hmm. That doesn't help me much then.

What if we put income generating assets as part of a shell business under her name?  They are currently just personal assets.
Is that something the IRS frowns upon?

I assume you are talking about passive income. You cannot receive benefits in a qualified retirement plan based on passive income.