Contribute to Your Solo 401k Even if You're an Employee
Double up for greater contributions to your solo 401k.
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PrintThe question arises, “Can I contribute to my solo 401k for a home-based business in addition to my 401k at my day job?”
The answer is generally “yes.”
Remember that your contributions are made of two parts: Your deferral (deducted from salary or earnings) and the sponsoring company profit-sharing contribution.
The salary deferral contributions (as in, deducted from Box 1 on your W-2) made at the day-job with your primary employer and the salary deferral contributions for your home-based business cannot exceed $15,500 (or $20,500 if you are 50 or over). IRC 402(g) limits these deferrals, but does not limit the number of plans in which you might participate.
Here is the good news: The profit-sharing contribution from your home based business is not limited by participating in other plans (unless you own both companies; day-job company and home based business company). We will leave the controlled corporation laws for another blog posting.
Let’s look at an example:
|
Age |
|
45 |
|
W-2 Salary |
day-job |
50,000 |
|
Net Income Sch C |
home-based |
50,000 |
|
Elective Deferrals: |
|
|
|
W-2 elective deferral (you decide amount up to limit) |
10,500 |
|
|
Extra you could defer from day-job net income |
5,000 |
|
|
Company profit-share: |
|
15,500 |
|
W-2 (25% of W-2 salary) |
12,500 |
|
|
Maximum possible share from home-based (19% after |
|
|
|
self-employment tax) |
|
9,293 |
|
|
|
21,793 |
|
|
|
|
|
|
Grand Total |
37,293 |
