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Solo 401k Contribution Calculations

Calculations for a S or C corporation or an LLC taxed as a corporation

Salary Deferral Contribution

In 2017, 100% of W-2 earnings up to the maximum of $18,000 and $24,000 if age 50 or older can be contributed to a Solo 401k. (2016 limits are $18,000 and $24,000 if age 50 or older).

Profit Sharing Contribution

A profit sharing contribution up to 25% of W-2 earnings can be contributed into a Solo 401k.

  • EXAMPLE 1
    A self employed consultant is age 50 and the owner of a subchapter S corporation with $50,000 of W-2 earnings in 2017. In this example, the self employed consultant could contribute $24,000 of salary deferrals + $12,500 profit sharing contribution (25% X $50,000) = $36,500 total Solo 401k contribution
  • EXAMPLE 2
    A self employed consultant is age 50 and the owner of a subchapter S corporation with $100,000 of W-2 earnings in 2017. In this example, the self employed consultant could contribute $24,000 of salary deferrals + $25,000 profit sharing contribution (25% X $100,000) = $49,000 total Solo 401k contribution.

In the above examples, salary deferral contributions are 100% tax deductible and reduce taxable W-2 wages and profit sharing contributions are generally tax deductible as a business expense.

Summary:

Generous Solo 401k contribution limits and the favorable way the annual contribution is calculated compared to other self employed retirement plans are attractive features of the Solo 401k.

Learn more about the benefits of a Solo 401k.

Solo 401k Calculator

To determine the annual retirement contribution you could make based on your income use the Solo 401k calculator.

 

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Disclosures:

*The information on this page is for informational purposes only and does not constitute, and should not be construed as, professional, legal or tax advice. To determine your individual tax situation and specific needs, please consult a professional tax advisor.

*Information contained in these sections merely highlight some benefits. There are risks involved with all investments that could include tax penalties and risk/loss of principal.