QUESTION:
I am considering opening a solo 401k. I currently have an LLC that makes minimal net income, I have no employees and for tax purposes file like a sole-prop. I also have a regular full-time job that does not offer a 401k. My question is, can I contribute the $19,500 from my savings (which is less than my w2 income from my regular job) or are contributions completely limited to income from the business only? I can't seem to find a definitive answer. I realize if I wanted to contribute the max amount the formula would be derived from the self-employment income, but I can't figure out whether the $19,500 could be made without making that in the business. I really appreciate the time and look forward to digging into this.
ANSWER:
Your contributions to a Solo 401k must be based on your self-employment income.
2) Keep in mind that for purposes of determining the amount of employee contributions that you can make to a solo 401k (i.e. up to $19,500 for 2020 if you are under 50 years of age), you must aggregate your employee contributions to both the Solo 401k and contributions to your "day job" 401k.
3) At the same time, you can make employer contributions to your Solo 401k regardless of contributions made to your "day job" 401k plan.
4) Please see more regarding contributions at HERE.
LISTEN TO RECORDING - Client Only Webinar: Deep Dive - Solo 401k Contribution Rules for Sole Props, LLCs C corp
I am considering opening a solo 401k. I currently have an LLC that makes minimal net income, I have no employees and for tax purposes file like a sole-prop. I also have a regular full-time job that does not offer a 401k. My question is, can I contribute the $19,500 from my savings (which is less than my w2 income from my regular job) or are contributions completely limited to income from the business only? I can't seem to find a definitive answer. I realize if I wanted to contribute the max amount the formula would be derived from the self-employment income, but I can't figure out whether the $19,500 could be made without making that in the business. I really appreciate the time and look forward to digging into this.
ANSWER:
Your contributions to a Solo 401k must be based on your self-employment income.
2) Keep in mind that for purposes of determining the amount of employee contributions that you can make to a solo 401k (i.e. up to $19,500 for 2020 if you are under 50 years of age), you must aggregate your employee contributions to both the Solo 401k and contributions to your "day job" 401k.
3) At the same time, you can make employer contributions to your Solo 401k regardless of contributions made to your "day job" 401k plan.
4) Please see more regarding contributions at HERE.
LISTEN TO RECORDING - Client Only Webinar: Deep Dive - Solo 401k Contribution Rules for Sole Props, LLCs C corp
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