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selliot
New Member

Spouse paid as W2 maximum Solo401K profits sharing contributions? Is it based on W2 earnings or LLC net profit because of being a spouse?

Spouse A is owner of LLC SpouseB works for LLC as W2 empl. SpouseA opens Solo 401K, SpouseB has acct under same Solo 401k. Both contributes max18,500 employee contrib. Spouse A also contributes 20% of net profits.  What is SpouseB's maximum profits sharing contributions? Is it based on W2 earnings or LLC net profit because of being a spouse?

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dmertz
Level 15

Spouse paid as W2 maximum Solo401K profits sharing contributions? Is it based on W2 earnings or LLC net profit because of being a spouse?

[The following assumes that Spouse A's LLC is not an S corp, otherwise Spouse A's 401(k) contributions are also determined by Spouse A's W-2, the same as Spouse B's.  It also assumes that both spouses are under age 50 since you referred to a maximum employee contribution of $18,500.]

If you are asking in regard to contributions for 2017, the employee contribution limit for someone under age 50 in 2017 is $18,000, not $18,500.

The 20% employer contribution rate for Spouse A is the result of an employer contribution base rate of 25%.  The employer contribution for Spouse B must therefore be 25% of W-2 compensation, except that total elective deferrals plus employer contribution cannot excess 100% of Spouse B's W-2 compensation, nor can the total for Spouse B exceed $54,000 for 2017 ($55,000 for 2018).

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