Hi, I am planning to convert a 401k With a company I am no longer employed with to a solo401k. I am self employed (real estate agent) and intend to use the funds to purchase a single family home (or a duplex if it falls in my price range). I'm will need to add about 15-25 thousand dollars to the solo 401k (once I've established it) to be able to make the purchase in the price range I am looking at plus leave some monies in reserve. I understand that the contribution limits are generous.
Here is my question:
1. If I contribute $18,000 to the solo401k for 2015, would I be able to deduct the $18,000 from my gross income on my 2015 tax return? (As would be the case with a regular 401k).
Yes, your employee elective deferrals are tax-deductible with a Solo 401k just like with the regular 401k.
If your plan allows for post tax contributions into Roth 401k account then of course those contributions are not deductible from your income but the pre-tax contributions are deductible.
@Fred Lutes Welcome to Bigger Pockets!
Yes. That $18,000 becomes $24,000 if you are over 50 because of the catch-up contribution.
As you probably already know, there are no limits on the rollover of the previous employer 401k to the Solo 401k.
If you are a sole proprietor, you can deduct your solo 401k contribution on line 28 of Form 1040 which is the adjusted gross income section.
"if your plan allows for post tax contributions into Roth 401k"
Are there some plans that don't have the Roth component? Any there any particular questions you suggest I ask before setting up my solo401k?
not all Solo 401k plans will have a Roth provision. Please send me a private message and I'll give you a link to a video which will help you get educated so that you can ask correct questions.