solo 401k contribution and deduction

[Jaegerml]

I have already made my elective deferral of $26,000 (age 65).  I have Schedule C income of $94,762 - my self employment tax is $13,390 (so 50% is $6,695). 

To calculate my additional contribution (employer contribution) the following:

1- $94,762 - $6,695 = $88, 067

2- $88,067 * 25% = $22,017 - this is the additional amount I can contribute (or any sum up to that amount) - correct?

3- Where do I record the additional amount in the 401k section so I get say the full $26,000 +$22,017= $48,017? (or an amount up to that value - say I only want to add an additional $20k vs the $22k)

Mick 

[MayaD]

Here’s how to enter your Solo 401(k) contributions in TurboTax:

1. Open or continue your return in TurboTax, if you haven’t already
2. Locate the search bar in the top right of your screen, and search for self-employed retirement plans (be sure to include the hyphen). Select the jump-to link at the top of the search results
3. On the Self-Employed Retirement Plans screen, answer Yes to the question Did you make a 2021 self-employed retirement plan contribution?
4. On the next screen, answer Yes to Did you contribute to an Individual or Roth 401(k) plan?
5. On the next screen, to enter your employee contributions, enter your Elective Deferrals and any Catch-Up Contributions you made in 2021
6. To enter your company contributions, enter your Employer Matching (Profit Sharing) contributions for 2021 
7. If you haven’t made all your contributions for the tax year and would like TurboTax to calculate your maximum contributions for the year, check the box next to Maximize Contribution to Individual 401(k) and Continue
8. On the Adjusting Self-Employment Income screen, enter any changes you'd like to make to your self-employment income as it’s been calculated by TurboTax (this is rare). Enter a positive number if you’re adding an amount, and a negative number if you’re subtracting. Select Continue
9. If you checked the box next to Maximize Contribution to Individual 401(k), you’ll see Your Self-Employed Retirement Deduction. This screen shows the maximum amount you can contribute to your Solo 401(k) for the tax year

How do I enter a Solo 401(k) in TurboTax?

[Jaegerml]

You didn't answer the first part of my question re calculating employer portion of solo 401k contribution - please reread and respond.

Mick

[DianeW777]

Calculating the amount of your allowable deduction is done like your example providing your plan has a 25% rate (see the link below).  Total plan contributions, excluding catch-up contributions ($6,500) for those age 50 and over, can't exceed $58,000 for 2021 ($61,000 for 2022).

The deadline for employee contributions to a Solo 401(k) is December 31 of the tax year, which means you can no longer make employee contributions for 2021. The deadline for company contributions is generally the tax filing deadline, which is April 17, 2022.

• One Participant (Solo) 401(k) Plans (nice example of calculation)
• What is a Solo 401(k)?
• ow do I enter a Solo 401(k) in TurboTax?

[Jaegerml]

You still didn't answer my question (and i probably didn't ask correctly as well :)).  If you look on the "table" - if you have a 25% plan it says you can contribute up to %58k but on deduct 20% of the employer contribution (but does say SEP, profit sharing and money purchase plans).  So is a solo 401k different and you can contribute AND deduct the full 25%?

Mick

[DianeW777]

Yes. You must use the special calculation for you the self-employed versus the employees. You can also use the check box to let TurboTax maximize your contribution.

• To determine the amount of his plan contribution, Joe (you the self-employed person) must use the reduced plan contribution rate (considering the plan contribution rate of 10%) of 9.0909% (10/110)  from the rate table in IRS Publication 560.  

  • Defined contribution plans. 

  • The deduction for contributions to a defined contribution plan (profit-sharing plan or money purchase pension plan) can't be more than 25% of the compensation paid (or accrued) during the year to your eligible employees participating in the plan. If you are self-employed, you must reduce this limit in figuring the deduction for contributions you make for your own account. See Deduction Limit for the Self-Employed Individuals later.

When you reach the self-employed retirement plans screen (Income & Expenses  > Other Business Situations > Self-Employed Retirement Plans) you can enter your information.