My wife has a small business structured a sole proprietorship with no employees.
Am I understanding correctly that I can open a Solo 401k for her, and she can contribute up to 25% of her net income as a business contribution and take a tax deduction for it?
Then she can contribute up to 100% of her net income or $18,000 whichever is less as a personal contribution?
So example: If her gross revenue was 50k, and her expenses were 25k she would have a net profit of 25k.
She can then put in 25% of 25k ($6,250) as a business contribution, and then still have 18,750 in net profit for which she could also contribute 18,000 into, leaving her with a functional income of $750 left to pay taxes on?
Am I doing that right? Any gotchas?
I assume I can't contribute more than the business earns. I can also be an employee and if I wasn't covered by a 401k at work I could also contribute 18k + match for myself as well right?