Running your own self-employed business is tough! A tool that can potentially help save more and/or reduce tax is the solo 401k!

A //THREAD\\ on its benefits and some FAQ...

First, let's start with the benefits and why I like the solo 401k 👇
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1️⃣ Invest more: Offer higher contributions over IRAs

2️⃣ The spouse exception! If your spouse earned income from the business as an employee, they can contribute and get profit-sharing $. This can double the contributions!
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3️⃣ Reduce taxes: Pre-tax contributions reduce taxable income. Higher limits allow for the ability to pay less tax to Uncle Sam.

4️⃣ Roth solo 401k: Ability to add a Roth Solo 401k in addition to traditional solo 401k to make Roth contributions without income limits.
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5️⃣ Mega backdoor Roth: Supercharge Roth money with after-tax (if plan allows) contributions, then converting it to Roth 401k.

6️⃣ Diversification: Diversify investments outside of your business.
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7️⃣ Loans: The option to take loans from the plan can give flexibility to a small business owner. While not recommended, this can be a valuable source of funds in a pinch.
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▻What's a solo 401k?
Qualified plan for self-employed or small biz owners with no full-time W2 employees (other than partners or spouse).

▻Who qualifies?
Small business owners, sole proprietors, freelancers, independent contractors (full-time biz or your side hustle!)
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▻What are the contribution limits?
As a self-employed person, you are both the employee and employer.

Contributions up to $57,000 (2020) and $58,000 (2021). Over age 50? You get catch-up contributions of an additional $6,500.
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Employee contributions: Up to $19,500 (+$6,500 age 50+). Employer contributions: Up to remaining $37,500 (2020)/$38,500 (2021).

▻How to determine the amount?
The employee contribution is up to 100% of earned income. Employer contribution up to 25% of net earnings.
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▻When is the deadline to establish a solo 401k?

For 2020 and forward the deadline is the business filing deadline or tax deadline, including extensions. Meaning you can adopt a solo 401k for the previous year up to the tax deadline.
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▻When is the contribution deadline?

Employee contributions: Elections must be made by Dec 31. The actual contribution can be made up to the personal tax filing deadline or extension.

Employer contributions: Up to the tax filing deadline of the business.

[END]

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More from @T_Gatzemeier

5 May
Pros and cons of directly holding digital assets vs. trusts vs. ETFs (one day): 👇

Digital assets directly: -Pros-

1. Considered property by the IRS (no wash sale rule).
2. You can hold it on or off-exchange and decide where to store it.
3. Use as currency or store of value.
-Cons-

1. You have to keep it properly secured.
2. You have to decide how and where to hold it.
3. If you dispose of, spend, or exchange at a gain, it's taxable.

Now what about #DigitalAsset Trusts 👇
#Crypto Trusts: -Pros-

1. Easier to purchase in an IRA.
2. It's easier to hold and manage.
3. Less worry about securing it.
4. You get exposure without worrying about storage or wallets.
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