My Solo 401k Maximum Contribution Calculations

The process of calculating the maximum contribution that an owner-only business may make to My Solo 401k is relatively straightforward. However, the calculations vary depending on whether the business is a sole proprietorship, a partnership or a corporation.

Sole Proprietor and Partnership

For sole proprietors, the figures needed to calculate the maximum contribution are the sole proprietor’s net profits from IRS Form 1040, Schedule C, and his or her self-employment (SE) taxes as determined on IRS Form 1040, Schedule SE. From these figures, the net earnings from self-employment may be calculated, which is the basis for determining the compensation that may be used for contribution purposes.

For partnerships, the figures needed to calculate a maximum contribution under My Solo 401k are each individual partner’s net profits, reported on IRS Form 1065, Schedule K-1, and each partner’s SE taxes as determined on IRS Form 1040, Schedule SE. Remember that he maximum My Solo 401k contribution is comprised of two components: an employer profit sharing contribution and an employee salary deferral contribution. Once net profits are determined, the following procedures for calculating the maximum amount of contributions are applicable for both sole proprietors and partnerships. In our next blog we will give examples of estimated calculation for a sole proprietor and a partnership.

When you Open Solo 401k, the solo 401k provider may have a Solo 401k Calculator on their website to assist you in easily calculating the maximum Solo 401k contribution.

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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