Small Side Business, Breaks Even - Solo 401k Contributions

[southerndoc]

If a stay-at-home spouse has a small side business that she makes 5-10k/year doing, can she contribute the entire amount to a Solo 401k as an employee contribution? Are you required to subtract expenses before the employee contribution? In other words, if she makes 10k but has 4k in expenses, can she make a 10k employee contribution and not deduct those expenses from her Schedule C? The goal of this is to put as much into a retirement account to grow instead of maximizing deductions currently.

[CordMcNally]

earned income self employment income and business expenses | Earned Income Tax Credit (irs.gov)

200022051 [PFP#500810401] (irs.gov)

[spiritrider]

The link from CordMcNally explains it all. You must claim all legitimate business expenses.

Not to mention it is crazy to pay extra self-employment taxes, federal income taxes and likely state income taxes to make extra tax-advantaged retirement account contributions.

Yes, we want to maximize tax-advantaged contributions, but in a cost effective manner. In this scenario is far, Far, FAR more cost effective to take all legitimate business expenses and make more tax-efficient taxable investments.

Failing to take all legitimate business expenses is both illegal and lacking perspective.

[southerndoc]

Thanks for the clarification. Was just a thought in my head -- a bad one at that from reading the links.