Hypothetical for 2024 tax year:
Taxpayer is a sole proprietor, over 50 years old and has Schedule C net profit of $60,000.
Taxpayer has a self-employed health insurance deduction of $26,000.
Taxpayer wants to contribute the maximum amount to a pre-tax solo 401(k) without losing any of the SEHID deduction—and contribute any remaining available amount to a Roth solo 401(k), again without losing any of the SEHID deduction.
Questions:
1. How much can Taxpayer contribute to a pre-tax solo 401(k) without losing any of the SEHID deduction?
2. How much can Taxpayer thereafter contribute to a Roth solo 401(k) without losing any of the SEHID deduction?
My calculations for maximum amounts allowed (without regard to SEHID):
1. Biz Net Profit$60,000.00
2. 1/2 Payroll Taxes($4,238.87)
3. Adj Business Net Profit$55,761.14
4. Annual Deferral Limit$23,000.00
5. Max Annual Deferral Limit$23,000.00
6. Adj Biz Net Profit After Deferral$32,761.14
Calc A (line 6 / 2)$16,380.57
Calc B (Line 3 x .20)$11,152.23
Calc C (Max cont - Line 5)$30,500.00
Max Employer Contribution (least of 3)$11,152.23
Catchup$7,500.00
Profit after emp'ee and emp'er contrib$21,608.91
Max Catchup allowed$7,500.00
My thoughts:
So, Taxpayer should by my calculations (1) make an employer contribution of $11, 152 (that is, the max) and (2) make an employee deferral of:
$55,761 (Adj Business Net Profit) minus
$26,000 (SEHID) minus
$11,152 (employer contribution) equals
$18,609 (maximum employee deferral without reducing SEHID)
Does that look right?
And what about the remaining employee deferral availability—($23,000 - $18,609) + $7,500? Can that be contributed to the Roth solo 401(k) without impacting SEHID?
Taxpayer is a sole proprietor, over 50 years old and has Schedule C net profit of $60,000.
Taxpayer has a self-employed health insurance deduction of $26,000.
Taxpayer wants to contribute the maximum amount to a pre-tax solo 401(k) without losing any of the SEHID deduction—and contribute any remaining available amount to a Roth solo 401(k), again without losing any of the SEHID deduction.
Questions:
1. How much can Taxpayer contribute to a pre-tax solo 401(k) without losing any of the SEHID deduction?
2. How much can Taxpayer thereafter contribute to a Roth solo 401(k) without losing any of the SEHID deduction?
My calculations for maximum amounts allowed (without regard to SEHID):
1. Biz Net Profit$60,000.00
2. 1/2 Payroll Taxes($4,238.87)
3. Adj Business Net Profit$55,761.14
4. Annual Deferral Limit$23,000.00
5. Max Annual Deferral Limit$23,000.00
6. Adj Biz Net Profit After Deferral$32,761.14
Calc A (line 6 / 2)$16,380.57
Calc B (Line 3 x .20)$11,152.23
Calc C (Max cont - Line 5)$30,500.00
Max Employer Contribution (least of 3)$11,152.23
Catchup$7,500.00
Profit after emp'ee and emp'er contrib$21,608.91
Max Catchup allowed$7,500.00
My thoughts:
So, Taxpayer should by my calculations (1) make an employer contribution of $11, 152 (that is, the max) and (2) make an employee deferral of:
$55,761 (Adj Business Net Profit) minus
$26,000 (SEHID) minus
$11,152 (employer contribution) equals
$18,609 (maximum employee deferral without reducing SEHID)
Does that look right?
And what about the remaining employee deferral availability—($23,000 - $18,609) + $7,500? Can that be contributed to the Roth solo 401(k) without impacting SEHID?
Statistics: Posted by cowdogman — Tue Sep 03, 2024 10:24 am — Replies 4 — Views 151