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Reap tax bonanza for solo 401(k)

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Suppose the only other employee in your sole proprietorship is your spouse who does the bookkeeping and billing. After a few lean years, business is booming and you want to sock away as much for retirement as you possibly can.

Strategy: Set up a solo 401(k) plan. Due to special tax rules, you can contribute more to this type of plan than other comparable retirement plans.

In fact, a solo 401(k) offers an un­­pre­­ce­­dented tax-saving opportunity for a married couple working together.

Here’s the whole story: For starters, you can elect to defer up to $17,500 in salary to a 401(k) plan (in both 2013 and 2014). Plus, if you’re age 50 or older, you can kick in an extra $5,500 for a maximum deferral of $23,000. The deferrals may be complemented by matching employer contributions subject to other limits.

Under the usual rules for defined contribution plans—such as SEPs and profit-sharing plans—the deductible contribution for 2013...(register to read more)

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