What is the maximum amount you can contribute to a solo 401(k) annually?
You can contribute up to $16,500 if you’re under age 50 and $22,000 if you’re age 50 or over. In addition to that you can invest company contributions up to 25% as well. The 401(k) contribution comes out of earned income and the company contribution comes out of profit income. Overall, the solo practitioner can actually contribute up to $49,000 – tax deferred – given contributions from income and then company contributions. What are the tax benefits that come with investing in a solo 401(k)? You have the ability to make a significant tax deferred contribution. Your solo 401k contributions are income tax deferred but you do have to pay FICA. A solo practitioner is typically going to be filing taxes quarterly and your solo 401k contributions will all be apart of that. Typically they’ll be paying their FICA as they go along, but they’ll be paying less in income tax as they go along too. What’s the benefit of investing in a solo 401(k) compared to an IRA? The big difference is the limits.
