Solo 401 k / self employed
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Returning Member

Solo 401 k / self employed

If I am 55 and self employed and have a solo 401k and I make a $25,000 contribution this year as an employee, I don’t need to included that income ( 25k)

when figuring my estimated taxes for federal state or self employment tax do I?

3 Replies
Level 15

Solo 401 k / self employed

The deduction for your self-employed retirement contribution gets subtracted from your income on which your income tax liability is determined.  However, it is not subtracted from your self-employment income on which self-employment taxes are calculated.  The overall tax liability against which you must make estimated tax payment is the sum of your income tax liability and other taxes like self-employment tax.

Returning Member

Solo 401 k / self employed

So I need to send in just the self employment tax on the 25k not state or federal income tax correct?

Level 15

Solo 401 k / self employed

You have to look at all of your income and tax withholding from other sources, plus any amount of self-employment earnings in excess of your Solo 401(k) contributions and the deductible portion of self-employment taxes and base your need to make estimated taxes on that.  The estimated tax payment would generally be only for your self-employment tax liability only if all of your net earnings from self-employment went to your deductible Solo 401(k) contributions and the deductible portion of self-employment taxes (the sum of which cannot exceed net earnings from self employment (and your other sources of income had sufficient tax withholding to cover the taxable income in excess of your standard or itemized deductions).

 

Another way to say it:  If without the self-employment income you would not need to make an estimated tax payment, and all of your self-employment income goes toward your Solo 401(k) contributions and the deductible portion of self-employment taxes, your estimated tax payment would need to cover only your self-employment taxes.

 

You can use Intuit's TaxCaster to estimate your overall tax liability.  This uses 2019 tax tables but the result should be close:  https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

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