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How to keep AGI low for IBR when moonlighting?

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  • How to keep AGI low for IBR when moonlighting?

    Excuse me if this is a dumb question. I'm a resident trying to get my feet wet in the intricacies of the tax code.

    So a little background:

    I'm a 2nd year in psychiatry residency, but I'm also in the National Guard, making another ~$30k more per year from that. I have the option to moonlight starting in July. My goal at this time is PSLF. I already make more than enough to maintain my lifestyle, and am putting my NG money into a taxable if for some reason PSLF doesn't happen.  I'm trying to figure out the best option to keep my AGI as low as possible with my future moonlighting income though, as I want to keep my IBR payments as low as possible.

    Thus: Can I set up a LLC for moonlighting to contribute up to the maximum $53,000 into a solo-401K? Where would I go to learn how to do this?  Any advice would be extremely helpful!

  • #2
    Not a dumb question at all. Absolutely, you can and should set up a solo-401k for your moonlighting income. You don't even have to be an LLC - you can do this using a sole proprietorship. If you qualify to contribute to an HSA (Health Savings Account), you should also consider setting one up.

    As far as where to go to learn about this, the WCI site is full of resources if you have the time to do the study on your own. You could also contact a fee-only financial planner for advice and I'm sure others will have ideas for you, too. Enter the search term "solo 401k" on the main site and you'll find helpful articles like this. Here is the link to the results that my search revealed.

    You should also consider having a CPA prepare your income taxes to take advantage of the home office and mileage deductions, if applicable.

    Thank you for serving our country.
    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Does your moonlighting gig give you a 1099?  I can moonlight, but since it's at our institution, they $$ goes to my monthly paycheck.  I probably should go talk to someone at HR about this and get a 1099 instead...

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      • #4




        Does your moonlighting gig give you a 1099?  I can moonlight, but since it’s at our institution, they $$ goes to my monthly paycheck.  I probably should go talk to someone at HR about this and get a 1099 instead…
        Click to expand...


        If you utilize the same malpractice coverage for moonlighting and residency, then you can only be paid through W2.  If they paid you through 1099, you'd have to get your own coverage.

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        • #5
          IIRC when I was a resident I was 1099 and covered under the hospital malpractice.

          Regardless that is what you should look into.  If you are w2 you cannot set up a solo 401k.  Presumably you won't be able to get up to 53k either unless you are doing a whole lot of moonlighting.  18k "employee contribution" and 25% of net profits for "employer"  Also keep in mind if you are already contributing to your regular 401k/403b via your residency you only get the one 18k limit.

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