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  • Solo 401k tax deduction

    I am earning both w2 and recently doing 1099 income as side gig. I recently opened a solo 401k account with Tdameritrade. I would like to know if the profit sharing (employer) contribution to a solo 401k is tax deductible?

    My situation:
    Married, both under 50yo
    W2 job: $270k, 403b maxed $19.5k, $5k employer match
    Backdoor roth: $6k
    1099 income: $130k

    ​​​​1099 eligible profit sharing (employer) contribution calculated at $25,651
    I am using this calculator: https://obliviousinvestor.com/solo-4...on-calculator/

    Is this $25,651 tax deductible towards my total income as a whole or just towards the $130k 1099 income? Will TurboTax be sufficient to do this deduction for me come tax filing?

    Thanks

  • #2
    Well, it’s 6 of one, half a dozen of the other except you should be aware the PS contribution d/n reduce your FICA taxes. Yes, TT s/b able to handle this with no prob. I am compelled to add, however, that this is not a situation I would recommend as a DIY - there are many areas you could miss and some nuances re: determining optimal 199A deduction, deprn calc’s, home office opportunities, etc. that could impact your results. Not saying you will miss them, just food for thought.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Self-employed employer contributions are not deductible on Schedule C, but rather deductible on Form 1040 Schedule 1. See Schedule C Instructions for Line 19, Form 1040 Schedule 1 Instructions for line 15 and Publication 560 Retirement Plans for Small Business(SEP, SIMPLE, and Qualified Plans)

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      • #4
        Thanks, it looks like the solo 401k profit sharing contribution is a deduction on all combined income according to those IRS docs. Good to know TurboTax can handle it.

        In terms of other deductions, I don't qualify for 199a, household income is above $415k and the 1099 job is healthcare related. I do telemedicine so my deductions are few since my operating costs are simply an internet connection and a computer. For simplicity I'll be doing the home office $5 per sqft x300 sqft ($1500 deduction).

        I'll welcome any other types of deduction suggestions but I think the solo 401k contribution is a greatest one.

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