If someone owns a one-member LLC that anticipates a net income of about $280,000 what is the best strategy for maximizing deductions when including the spouse in the plan?
Under an LLC taxed as a corporation, $112,000 in W-2 wages for each spouse will allow for the maximum 401k contributions in 2005. So, pay the husband approximately $112,000 on a W-2 and pay the wife approximately $112,000 on a W-2. From his W-2 income, H defers $14,000 into the plan and W also defers $14,000 into the plan (unless they are over 50 or turn 50 this year, in which case they can each defer $18,000 of their W-2 income into the plan). The remaining net income after the W-2’s is approximately $56,000. From the remaining net income of $56,000 have the LLC contribute $28,000 for the husband (25% of $112,000) and $28,000 for the wife (25% of $112,000) in profit sharing, leaving no remaining net taxable income to the LLC or its member(s) to distribute under a K-1.
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