Solo 401K and Real Estate

[David Huynh]

I have funds sitting in my company sponsored 401K plan; however, I would like to transfer the funds over to a Solo 401K to invest in RE. From watching Youtube, one of the requirements of opening a Solo 401K is that you must be self-employed or have a company. If I have properties, but they are not in an LLC, does that still qualify as a company or self-employment? Sorry, if this does not make any sense. I'm just trying to find a better way to utilize the money that I have sitting in my 401K while still maintaining a tax shelter.

Thank You.

David

[Logan Allec]

@David Huynh, rental real estate (passive activity) wouldn't count. You need earned income, e.g., income you'd put on Schedule C. You don't necessarily need an LLC -- just earned income from your own business.

Also, your business has to be legit, ongoing, etc.  You can't set it up just for purposes of qualifying for a Solo 401(k).

Also, if you contribute to your day job's 401(k), you can still contribute to your Solo 401(k), but the total contribution limit ($18,500 for 2018) is the max for both plans combined, not separately, meaning that it's not $18,500 for your day job's 401(k) and $18,500 for your Solo 401(k) but rather a grand total of $18,500 for both.

@Dmitriy Fomichenko could elaborate.