I receive K1 income through a family rental property. If i contribute the total amount received to my 401k will that offset my taxable income at a 1:1 ratio?

[DanielV01]

Potentially, yes.  A 401(k) contribution reduces your taxable income by the amount of the pre-tax contribution.  However, keep in mind that since the deferral is made pre-tax, you might not "see" the result on your tax return per se.  Rather, you will have less income reported to you as taxable on your W-2 (and corresponding 1040).  Your rental income from Schedule K-1 will be added to this taxable income, and you will not have had additional Federal withholdings taken out against it.

Just a couple of details you might want to keep in mind if this is the election choice you wish to make.

[DanielV01]

You also want to keep in mind that there is a limit to what you can contribute to your 401(k) for the year.  For 2019, the amount was $19,000.  (If you are 50 or over, you may contribute an additional $6,000, for a total of $25,000).

[Carl]

I receive K1 income through a family rental property. If i contribute the total amount received to my 401k will that offset my taxable income at a 1:1 ratio?

I am somewhat in disagreement with the other responses here. It depends on the type of income reported on the K-1 as well as other types of income you may have from other sources. Rental income is passive income and doesn't count for jack squat for retirement contributions. Retirement contributions can only be made against *EARNED* income. So unless you have "EARNED" income from other sources, contributions made from passive income will result in a penalty being assessed every year, until you remove that contribution and the earnings of that contribution from the 401(k) account.

[Rick19744]

@DanielV01 are you absolutely sure about your response here?

You may want to revisit your response as rental income is not self-employment income.

[DanielV01]

@tmgrande3470.  One additional clarification, as brought up by @Carl and @Rick19744:  earned income is a requirement to contribute to a 401(k).  The nature of your question suggests that you already had a 401(k) set up through an employer, and you wanted to make extra contributions to offset the rental income and balance the amount out.  If that is the case and what you had in mind, my original answer is correct.  However, if you don't have additional earned income (such as wages or self-employment), you would not be able to offset the rental income through a 401(k) deferral.  (Also note:  even if you have a 401(k) plan, your plan administrator may have additional restrictions that limit the amount you can contribute.  One restriction could be based on a percentage of your income)

[Anonymous]

you can not contribute to a 401k.  to be eligible to make such a contribution you need earned income (income subject to medicare/social security taxes)   rental income is not earned income.  if you already made a contribution you need to take it out including earnings thereon .    failure to do so by the due date for 2019 return will subject you to penalties