Are employer contributions to a solo 401k completely deductible? And for a sole proprietor are employee and employer contributions all deducted?
cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
New Member

Are employer contributions to a solo 401k completely deductible? And for a sole proprietor are employee and employer contributions all deducted?

For example, if I am a sole prop with no employees and earn $100k this year, I can: Contribute $17k to solo 401k as an employee Contribute $20k to solo 401k as an employer (~20% of $100k) And then deduct $37k on my taxes on line 28 of the 1040?

1 Reply
Highlighted
Level 15

Are employer contributions to a solo 401k completely deductible? And for a sole proprietor are employee and employer contributions all deducted?

If the $100,000 is net profit, 20% of $100,000 as an employer contribution is a bit too high because of the amount that goes to self-employment taxes.  You must first subtract the deductible portion of self-employment taxes, then multiply by 20%.  The result works out to $18,587 of employer contribution (or slightly more if you max out Social Security tax due to also having another job).  However, for 2018 the regular elective deferral limit is $18,500, so your maximum combined limit on Schedule 1 line 28 would be $37,087 (assuming no elective deferrals or Roth contributions to another employer's qualified retirement plan that would use up part of the $18,500).  TurboTax calculates the maximum for you if you mark the Maximize box for an individual 401(k) (and you make no elective deferrals or Roth contributions to another employer's plan).

v
Privacy Settings