Author Topic: Solo 401k for a sole proprietorship  (Read 1247 times)

Allen

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Solo 401k for a sole proprietorship
« on: July 07, 2016, 04:25:11 PM »
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?

bacchi

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Re: Solo 401k for a sole proprietorship
« Reply #1 on: July 07, 2016, 05:29:56 PM »
Yes but the "company" contribution is 20% after 1/2 of the SE tax, if she files as a sole proprietor.

COlady

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Re: Solo 401k for a sole proprietorship
« Reply #2 on: July 08, 2016, 09:55:42 AM »
I use this calculator to arrive at the allowable max.  Be sure to select the sole prop. button.

http://solo401k.bcmadvisors.com/calculator.html

I recently set up a i401k for my self employment income. You will need an FEIN for the plan - you can get a FEIN instantly on the IRS website.

COlady

  • Bristles
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Re: Solo 401k for a sole proprietorship
« Reply #3 on: July 08, 2016, 09:57:46 AM »
It looks like the link is broken on that page. Try this one:

http://www.sensefinancial.com/services/solo401k/solo-401k-plan-calculator/

Allen

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Re: Solo 401k for a sole proprietorship
« Reply #4 on: July 08, 2016, 01:02:12 PM »
This is super helpful thank you!