Proposed 15% tax rate on business income could reduce Solo 401(k) Plan and SEP IRA contributions
IRA Financial Group, the leading provider of self-directed solo 401(k) plans, has issued a report that believes that President Trump proposed 15% tax rate for so called pass-through businesses, such as partnerships, LLCs and S Corporations, will help many small business owners reinvest in their business by saving on taxes, but could also result in less solo 401(k) plan or SEP IRA contributions for many small business owners. “Because business passthrough income will be taxed at a lower tax rate then compensation and since compensation is the basis for solo 401(k) or SEP IRA contributions for many small business owners, President Trump’s proposed tax rate of 15% could result in small business owners making less plan contributions,” stated Adam Bergman, a tax partner with the IRA Financial Group.
According to Mr. Bergman, since retirement savings is based on the amount of compensation one receives and not on the amount of profits a business generates, the less compensation one receives will directly impact the amount of retirement savings that may be available and could impact the amount of Solo 401(k) plan or SEP IRA contributions available to many small business owners.
The solo 401(k) Plan, also known as the individual 401(k) Plan or self-directed 401(k), is an IRS approved qualified retirement plan that was created specifically for the self-employed. The IRS created the solo 401k Plan to be a cost effective retirement solution for the self-employed or a business owner with no employees. A solo 401K is perfect for sole proprietors, small businesses and independent contractors such as consultants. A solo 401k plan offers the same advantages as a self-directed SEP IRA, but without having to hire a special custodian or create an LLC. With IRA Financial Group’s IRS approved solo 401(k) plan, a plan participant can make annual contributions up to $54,000 or $60,000 over the age of 50, as well as borrow up to $50,000 tax-free, and make traditional as well as tax deferred alternative asset investments, such as real estate.
The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.
IRA Financial Group is the market’s leading provider of self-directed IRA LLC and Solo 401(k) plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.