https://www.solo401k.com - An Overview

Individuals are clambering to complete their 2013 tax year return and also questioning how they can save tax for the 2014 tax year. The Solo 401( k) is a technique that few make use of. The Solo 401( k) is not a new type of 401( k) strategy and has the very same regulations and also needs as any type of other 401( k) strategy.

How much can one contribute? Business owner puts on 2 hats in a 401( k) strategy: staff member as well as employer. Contributions can be made to the strategy in both capabilities. The owner can choose to defer approximately 100 percent of settlement (also called earned earnings for the freelance) as much as $17,500 for both 2013 and 2014 tax years. If he is age 50 or over, there can be an extra $5,500 (called the "catch-up" contribution) to make the complete $23,000 annually.

The 2nd part is the employer payment of approximately either 25 percent of the compensation specified by the plan, usually earnings, or a various calculation for the freelance individual. One specifies one's payment as "earned income", which is net earnings from self-employment after subtracting fifty percent of one's self-employment tax (calculated on Schedule SE). 20 percent of this number is what the employer payment is. The total of both the worker wage deferment as well as the company payment can not surpass $51,000 for 2013 and also $52,000 for 2014. If the person is age 50 or over, there can be an extra $5,500 "catch-up" contribution, making the total optimum payment to the Solo 401( k) plan $56,500 for 2013 and $57,500 for 2014.

Instance of a Set up C, unincorporated small business, where the owner is at least age 50 and also the net profit in 2014 is $200,000:

If one takes 20 percent of $190,067.85, the optimum employer revenue sharing payment is $38,013.57. In contrast, the payment limit for a STRAIGHTFORWARD Individual Retirement Account plan would certainly be $20,035.96 or $38,013.57 for a SEP IRA strategy. One can learn more about setting up a Roth Solo 401k contribute considerably more to a Solo 401(k) rather of these other two company Individual Retirement Account plans, as well as certainly much more than the $6,500 limitation for a traditional specific IRA plan.

Due dates: One should develop your Solo 401(k) plan by December 31, 2014, if you intend to make a contribution for tax year 2014 as well as reduce taxable income. The payments should be moneyed by your tax-filing deadline. If one declare the 6-month extension before the April 15, 2015 deadline to file one's 2014 income tax return, one would have up until October, 15, 2015, to make the cash money contribution.


The Solo 401( k) is not a brand-new kind of 401( k) plan and also has the same policies and also requirements as any type of various other 401( k) plan. The service proprietor wears 2 hats in a 401( k) strategy: staff member and employer. If the person is age 50 or over, there can be an added $5,500 "catch-up" contribution, making the total maximum payment to the Solo 401( k) intend $56,500 for 2013 and $57,500 for 2014.

One can add considerably more to a Solo 401(k) instead of these various other 2 company IRA plans, as well as absolutely much more than the $6,500 limitation for a typical individual IRA plan.

Deadlines: One need to develop your Solo 401(k) strategy by December 31, 2014, if you desire to make a contribution for tax year 2014 as well as decrease taxed revenue.