Solo 401k: Calculating My Solo 401k contributions for a Sole Proprietor

Sole Proprietor Solo 401k Calculation
Once the net profits have been calculated on the Schedule C, and the SE tax figures have been determined (or estimated in the case of advance planning), the maximum Solo 401k contribution may be determined as follows.

Step 1:
Determine compensation

a. net profits – 1/2 SE tax = pre-profit sharing deduction compensation

b. pre-profit sharing deduction compensation = compensation
1 + contribution rate expressed as a decimal
(.25 is the maximum)

Step 2: Determine maximum profit sharing contribution
maximum profit sharing contribution = .25 x compensation

Step 3: Determine maximum salary deferral
maximum salary deferral = lesser of $18,000, or
compensation-maximum profit sharing contribution

Step 4: Calculate maximum Solo 401(k) contribution
maximum Solo 401(k) contribution = maximum profit sharing contribution
+ maximum salary deferral

NOTE: The maximum Solo 401(k) contribution for 2016 may not exceed $53,000 (unless your age 50 or older and therefore qualify for an additional $6,000 of catch-up contributions)

You can use our online Solo 401k contribution calculator to determine your contribution; CLICK HERE.

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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 wells as alternative investments such as real estate, private companies, promissory notes, precious metals, tax liens and equities. Learn more about Mark Nolan and My Solo 401k Financial >>

  • 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 wells as alternative investments such as real estate, private companies, promissory notes, precious metals, tax liens and equities.
    Learn more

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