Author Topic: SEP vs Individual (Solo) 401K  (Read 1212 times)

kkel

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SEP vs Individual (Solo) 401K
« on: December 12, 2016, 09:15:47 AM »
Hi ~
I would like to max out my retirement contributions before the end of the tax year.  I own two small businesses in which I net about $20,000 (both together).  I get an add'l $15,000 per year at a part-time job. I have just received some cash dividends for $35,000 and want to start a retirement account that I will contribute to regularly. I would like to put as much of this to my tax advantage.  I think I can also get a Roth or other IRA for an additional $5550 in contributions (and tax deduction).   (I have quite a bit in investments - $700,000 - but none in retirement accounts due to a divorce that left his 401k intact).

Any help would be so appreciated! 

PS. If I haven't prepared my taxes for 2016, how do I determine the amount I can contribute?  What happens if I over contribute?
« Last Edit: December 12, 2016, 09:26:44 AM by kkel »

terran

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Re: SEP vs Individual (Solo) 401K
« Reply #1 on: December 12, 2016, 10:39:33 AM »
Do you have any employees in either business? If not then go with the solo 401k -- it will allow you to put in more at that income level (and at any income level below the mid-high $200s)

SeattleCPA

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Re: SEP vs Individual (Solo) 401K
« Reply #2 on: December 12, 2016, 11:27:53 AM »
One thing to maybe keep in mind is that with roughly $35K in earnings and (it sounds like) roughly $35K in dividends, your marginal tax rate maybe pretty low.

If the dividends are qualified dividends, the tax rate on that income equals 0% at a federal level.

That $35K of regular earnings may be mostly sheltered from income taxes if you itemize deductions, count your personal exemption, pay for health insurance, etc.... and what is taxed will be taxed at 10%...