Contribute to IRA LLC and Self-Directed 401k MAGI Rules

I’m a business attorney in Texas and I have utilized your services in the past to set-up Self Directed 401(k)’s for my clients. I have a quick question regarding a contribution scenario:

QUESTION 1:

Can a husband utilize profit sharing from side business to increase his contributions even though he has a day time job?

ANSWER: Yes, provided the rules outlined in the following link are satisfied.  See following link for more on this. https://www.mysolo401k.net/multiple-retirement-plan-solo-401k-contribution-rules/

QUESTION 2:

Finally, how would these 401k contributions effect the deduct-ability of an IRA LLC contribution if we were to set those up through your firm as well?

ANSWER:  See below charts for this.

I’m making a late year push to get several clients to set up self directed 401k accounts and I plan to utilize you services in a similar manner as last year. It was very efficient.

Table 1-2. Effect of Modified AGI1 on Deduction if You Are Covered by a Retirement Plan at Work

If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction.
IF your filing
status is …
AND your modified adjusted gross income (modified AGI)
is …
THEN you can take …
single or
head of household
$59,000 or less a full deduction.
more than $59,000
but less than $69,000
a partial deduction.
$69,000 or more no deduction.
married filing jointly or
qualifying widow(er)
$95,000 or less a full deduction.
more than $95,000
but less than $115,000
a partial deduction.
$115,000 or more no deduction.
married filing separately2 less than $10,000 a partial deduction.
$10,000 or more no deduction.
1 Modified AGI (adjusted gross income). See Modified adjusted gross income (AGI) , later.
2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” filing status).

Table 1-3. Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work

If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction.
IF your filing
status is …
AND your modified adjusted gross income (modified AGI) is … THEN you can take …
single,
head of household, or
qualifying widow(er)
any amount a full deduction.
married filing jointly or separately with a spouse who is not covered by a plan
at work
any amount a full deduction.
married filing jointly with a spouse who is covered by a plan
at work
$178,000 or less a full deduction.
more than $178,000
but less than $188,000
a partial deduction.
$188,000 or more no deduction.
married filing separately with a spouse who is covered by a plan
at work2
less than $10,000 a partial deduction.
$10,000 or more no deduction.
1 Modified AGI (adjusted gross income). See Modified adjusted gross income (AGI) , later.
2 You are entitled to the full deduction if you did not live with your spouse at any time during the year.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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