I max out my define benefits plan/401K each year through my multi partner GI practice of $53,000. I am under age 50. I also have an LLC that I co own with my wife which contains our rental properties. My wife has an individual 401K through the LLC. Can I also set up an individual 401K (for myself) even though I contribute the max $53K to my practice 401K/define benefits plan? I was told by one “professional” I could not.
Perhaps your wife but almost certainly not for you as you have a "day job". You must have earned income to contribute to a retirement plan and rental income is passive unless your wife manages to qualify as a real estate professional. There also might be a possibility if one of you is responsible for tasks that could justify a paycheck, such as maintenance, bookkeeping, collections, etc. But then you would have to get into payroll reporting and FICA taxes that you don't otherwise have for passive income, which would be a high hurdle to overcome. As you probably know, contributions to a 401k reduce federal and state taxable income, but not FICA wages, so you would pay FICA (as employer and employee) on the total pay.
If you have a teenager who could work for the RE business, you could have an opportunity to pay him/her and contribute to a Roth on your child's behalf.
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