To maximize my solo 401K contribution, I get a box saying that only part of it is deductible. Not sure if I should use the max amount or the full deductible amount?
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tankman12345
New Member

To maximize my solo 401K contribution, I get a box saying that only part of it is deductible. Not sure if I should use the max amount or the full deductible amount?

I am a sole proprietorship with a solo 401K., no employees.  When I ask TurboTax to calculate the max solo 401K contribution, it gives me a total of $36,000.  It then says that only $24,000 is deductible.  Not sure which amount to use now, the max contribution number or the max deductible number.  Obviously, the higher contribution results in lower overall tax, but I just want to make sure I'm doing this correctly and not missing anything important.  Thanks.    

8 Replies
Critter
Level 15

To maximize my solo 401K contribution, I get a box saying that only part of it is deductible. Not sure if I should use the max amount or the full deductible amount?

$24K is the max you can put into a 401K per year ... any more than that will get you in big trouble with the IRS. So even though you have enough income to put in more you are limited to the annual maximum. 

tankman12345
New Member

To maximize my solo 401K contribution, I get a box saying that only part of it is deductible. Not sure if I should use the max amount or the full deductible amount?

Thanks.  I was somewhat fooled as Turbo Tax would have let me make a $36,000 contribution and then I would have been in trouble.
dmertz
Level 15

To maximize my solo 401K contribution, I get a box saying that only part of it is deductible. Not sure if I should use the max amount or the full deductible amount?

$18,000, plus a catch-up of $6,000 if age 50 or over, is the maximum elective deferral or Roth 401(k) contribution  permitted by an individual across all plans in which the individual participates.  A separate employer contribution is permitted to the solo 401(k) (if net profit is sufficient).  For someone age 50 or over the maximum total to the solo 401(k) cannot exceed $60,000.
dmertz
Level 15

To maximize my solo 401K contribution, I get a box saying that only part of it is deductible. Not sure if I should use the max amount or the full deductible amount?

Perhaps TurboTax is telling you that your maximum *employer* contribution is $36,000.  That would be the case if your net profit from self employment was at least $189,890.  $36,000 is the maximum possible employer contribution if you max out your elective deferrals or Roth 401(k) contributions.
Critter
Level 15

To maximize my solo 401K contribution, I get a box saying that only part of it is deductible. Not sure if I should use the max amount or the full deductible amount?

I thought about that last night...there is a difference between the employee & employer contribution limitations.
JKBoheme
New Member

To maximize my solo 401K contribution, I get a box saying that only part of it is deductible. Not sure if I should use the max amount or the full deductible amount?

I'm over 50 yr old and have a solo IRA.  I thought the max I can contribute is $62k for 2019.  When I enter $19k for employee contrib and $6k for catchup and $37k for employer contrib, TurboTax enters $60,258 instead of $62k?  I entered $61k for 2018 and TurboTax was fine with my numbers?

Thanks, John

SusanY1
Employee Tax Expert

To maximize my solo 401K contribution, I get a box saying that only part of it is deductible. Not sure if I should use the max amount or the full deductible amount?

Are there enough earnings in the company (per the tax return) to cover $62,000? That number sounds like one being limited by the earnings/net income. 

 

@JKBoheme

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JKBoheme
New Member

To maximize my solo 401K contribution, I get a box saying that only part of it is deductible. Not sure if I should use the max amount or the full deductible amount?

AGI = $258k.  Taxable income = $209k.  Should be sufficient earnings to cover funding $62K into my business Solo IRA.  I funded $61k in 2018 with earning about $15k higher than 2019.  Schwab told me $62k was the limit so I already funded this amount into the Solo IRA.  Maybe there is a bug in the TurboTax software?

Thanks, John

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