How to calculate maximum Roth IRA contribution after maximizing solo 401k contribution

[Delal]

I want to maximize my contributions to both my (pre-tax) individual 401k account and my regular Roth IRA (i.e. not the Roth part of my individual 401k).
I am not sure about how to calculate my earned income for the purposes of maximizing my Roth Ira account.

Is my earned income (for Roth Ira purposes) equal to my net profit minus my individual 401k contribution minus 1/2 SE tax? 

So for example, with a net profit of 48K and a maximum individual 401k contribution of about 39,920 (employee and employer parts) and 1/2 SE tax of about $3,391, I would have an earned income of about $4,689 and this would be the maximum amount I could contribute to a regular Roth IRA?

Therefore I could not contribute the maximum $8K (i'm over 50) even though my net profit minus 1/2 of SE tax is much higher than 8K?

Thanks in advance

[Bsch4477 · Accepted solution]

Correct. Your earned income is net income less half of S/E tax less total 401-K contributions as you posted. 

[Delal]

Thanks. Do I also need to deduct my self-employed health insurance (i.e. my share of health insurance premiums, as opposed to the ACA subsidies I might receive)?

It appears on Schedule 1 (line 17) as part of my "adjustments to income" 

[dmertz]

"Do I also need to deduct my self-employed health insurance"

For the purpose of having the earnings needed to support a Roth IRA contribution?  No.

Deductible retirement contributions reduce the amount of self-employment net earnings available to support the self-employed health insurance deduction.  Roth IRA contributions do not result in this reduction because such contributions are nondeductible.  Your traditional 401(k) deferrals do reduce net earnings available to support the self-employed health insurance deduction.  The net profit goes first to support the deductible portion of self-employment taxes, next to support deductible retirement contributions, then to support the self-employed health insurance deduction.

If your self-employed 401(k) provides a designated Roth option (likely it does because of recent tax code changes related to catch-up contributions for highly-compensated employees), you might consider making some of your 401(k) contributions as Roth contributions, allowing you to increase your Roth IRA contribution and perhaps your self-employed health insurance deduction.  For example, if I have $8,608 of net profit from self employment, that would give me $8,000 of net earnings from self-employment after subtracting the deductible portion of self-employment taxes.  That $8,000 of net earnings would support an $8,000 designated Roth contribution to the 401(k), an $8,000 Roth IRA contribution and an $8,000 self-employed health insurance deduction.  The deductions on Schedule 1 would total $8,608.

However, depending on the amounts involved, making a designated Roth contribution to the 401(k) instead of a traditional deductible contribution could increase your AGI and affect your ACA credit.