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Individuals are clambering to complete their 2013 tax year return and questioning just how they can conserve tax obligation for the 2014 tax obligation year. The Solo 401( k) is an approach that few use. The Solo 401( k) is not a brand-new kind of 401( k) plan and has the same policies and also needs as any other 401( k) plan.

How much can one add? Business owner uses two hats in a 401( k) strategy: employee as well as employer. Payments can be made to the strategy in both capabilities. The owner can elect to postpone up to 100 percent of compensation (likewise known as earned revenue for the independent) approximately $17,500 for both 2013 as well as 2014 tax obligation years. If he is age 50 or over, there can be an added $5,500 (called the "catch-up" payment) to make the complete $23,000 each year.

The 2nd part is the company payment of up to either 25 percent of the settlement specified by the plan, generally wages, or a different estimation for the independent individual. If the individual is age 50 or over, there can be an extra $5,500 "catch-up" contribution, making the complete optimum contribution to the Solo 401( k) plan $56,500 for 2013 and $57,500 for 2014.

Example of a Set up C, unincorporated local business, where the owner is at the very least age 50 and also the web revenue in 2014 is $200,000:

If one takes 20 percent of $190,067.85, the maximum company profit sharing payment is $38,013.57. In contrast, the payment limit for a STRAIGHTFORWARD IRA strategy would be $20,035.96 or $38,013.57 for a SEP IRA plan. One can contribute significantly even more to a Solo 401(k) instead of these various other two company IRA strategies, and definitely much even more than the $6,500 restriction for a standard individual IRA plan.

Target dates: One should learn more develop your Solo 401(k) plan by December 31, 2014, if you wish to make a contribution for tax year 2014 and also decrease gross income. The contributions need to be moneyed by your tax-filing due date. If one apply for the 6-month expansion before the April 15, 2015 due date to submit one's 2014 tax return, one would have till October, 15, 2015, to make the cash payment.


The Solo 401( k) is not a brand-new type of 401( k) strategy and also has the exact same policies and demands as any kind of other 401( k) strategy. The business proprietor puts on two hats in a 401( k) plan: worker and also employer. If the individual is age 50 or over, there can be an added $5,500 "catch-up" contribution, making the overall optimum payment to the Solo 401( k) plan $56,500 for 2013 as well as $57,500 for 2014.

One can add considerably more to a Solo 401(k) instead of these various other 2 employer IRA plans, as well as absolutely much more than the $6,500 limitation for a standard specific IRA plan.

Deadlines: One need to develop your Solo 401(k) strategy by December 31, 2014, if you desire to make a contribution for tax year 2014 as well as minimize taxed income.