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My Solo 401K Contribution Rules

One of the most popular reasons for having a solo 401(k) Plan is the ability to make high annual contributions in either pre-tax or after tax (Roth format). Under the 2014 Solo 401(k) contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $17,500. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $52,000, an increase of $1,000 from 2013.

My Solo 401K Plan Contribution Rules
My Solo 401K Plan Contribution Rules

For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $23,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $57,500, an increase of $1,000 from 2013.

One of the main benefits of a Solo 401(k) Plan is the opportunity to make higher contributions. Under most retirement plans that an owner only business could establish, the maximum annual deductible contribution is 25 percent of the business owner’s compensation.

Updated Solo 401(k) Contribution Limits for 2015

The IRS Announced the 2015 Solo 401(k) Contribution Limits: the maximum employee deferral contribution increases $500 to $18,000. For those age 50 and older, the catch-up contribution limit also increases $500 to $6,000 (for a maximum contribution of $24,000).

The high annual contribution rules make the Solo 401(k) plan the most popular retirement plan for the self-employed.

To learn about the advantages of adopting a solo 401(k) plan, please contact a retirement tax professional at 800-472-0646.

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Posted in 401(k)