Self-employed Individual Solo 401k FAQ- How can I use a solo 401k to qualify for 199a tax deduction?

Please check out this good question from our Daily Live Zoom call. Subscribe to our YouTube Channel to get notifications of our Daily FAQs.

Self-employed 401k FAQ: Which Solo 401k contributions function to lower my income? I ask because I want to keep my income below the threshold for the 199a tax deduction.

The threshold issue is that in order to set up a Solo 401k, one must be eligible (i.e. self-employed individual with no full-time w-2 employees working for any business owned by such person or a spouse if any).

If the goal is to make contributions to reduce taxable income now, the self-employed owner could make pre-tax Solo 401k employee contributions and/or Solo 401k employer contributions (which employer contributions are always pre-tax contributions0.

For example, for 2022 a solo 401k owner may contribute 100% of his or her self-employment compensation up to $20,500 (plus an additional $6500 if such person is 50 or older) as a pre-tax Solo 401k employee contribution (provided that such person is not making contributions to another plan such as a 401(k) plan that such might have through a day job).

On top of that, if such a person has the self-employment compensation to justify it, the Solo 401k owner may also make an employer contribution equal to 20% of the self-employment compensation provided that the total of all Solo 401k contributions does not exceed the lesser of self-employment compensation or the overall limit (e.g. $61,000 for 2022).

Tags: , , , , , , ,

About George Blower

I have the privilege of educating our clients about our products and services so that they can make informed and confident decisions about their financial future. Prior to joining My Solo 401k Financial, I served as the general counsel for a subsidiary of a Fortune 500 financial services company. Learn more about George Blower and My Solo 401k Financial >>


  • Popular Video

  • ROBS 401k Funding Process

  • Solo 401k Contributions Including Mega

  • Checkbook IRA LLC

  • About MySolo401k

    We help our clients take control of their retirement money. Our products and services provide our clients the freedom to invest their retirement savings in their own business as well as alternative investments such as real estate, private companies, promissory notes, precious metals, tax liens and equities.
    Learn more

    Connect with us

  • We’re here to help.

    Call: 800-489-7571


    8:00 am - 4:00 pm PT

    Why us?