Solo 401k Plan for Rental Property Self-Employed Business
I own & manage rental properties. Am I able to Solo 401k for my rental property business if I have another 401k with my employer?
Yes the IRS rules allow for participation in multiple 401k plans. Fore more on these rules, VISIT HERE.
However, in order to open a solo 401k plan the eligibility rules have to be satisfied which encompass the following.
1. Not employee any full-time non-owner W-2 employees (those working 1,000 hour or more) in any of your self-employed businesses. Those that own multiple businesses need to be aware of the controlled group rules before proceeding to open a solo 401k plan. To learn more about the controlled group rules, CLICK HERE.
2. The services that you are performing have to be performed at least on a part-time basis and must be material based. For example, in the context of managing rentals, you would need to be managing the non-retirement account owned properties and treat the income earned as earned income not passive income. The purpose of the earned income rules from a self-employment perspective is to provide a solo 401k plan for the self-employed so that they can save for retirement, and to exclude inactive owners whose income is derived only from investments as investment income is not considered “earned income.”
In sum, if you own multiple properties outside of your retirement account which you actively manage (e.g., screen potential tenants, collects rent checks, performs some of the routine property maintenance, and arranges for contractors to perform some or all of the property improvements or repairs), you are arguably self-employed and can thus open a solo 401k plan. To learn more about the solo 401k eligibility rules, VISIT HERE.