Reducing Income Tax Strategies

[Neil Copeland]

Need some help from some seasoned professionals. I had a great discussion with my CPA today about a number of things that I needed to know, and she really tuned me up. I will have a solo 401k soon, and I already have an LLC that generates active income.

My ultimate question is this; is there a way to use my solo 401k to reduce my current tax liability?  

[Ashish Acharya]

Originally posted by @Neil Copeland:

Need some help from some seasoned professionals. I had a great discussion with my CPA today about a number of things that I needed to know, and she really tuned me up. I will have a solo 401k soon, and I already have an LLC that generates active income.

My ultimate question is this; is there a way to use my solo 401k to reduce my current tax liability?  

No, solo has to be established by dec  31st. 

 If you want the benefit this year, unlike qualified plans like 401k, SEP can be establishes by the Due date of the 2018 return. You have  until october to establish that. 

Both of them have same limit, but SEP is maxed at the 25% compensation(for you adjusted SE income time 20%)  up to 55k. 

Really can’t help you without knowing your income. 

On top of that, hopefully you are already running you active business via S -Corp to save on self employment taxes.

Also the deadline to contribute to deductible IRA by April 15th, that's $5500 deduction on top of your SEP. Might not be deductible based on your AGI if you have SEP.

Also look into HSA and FSA( if you already are paying for the dependent care with after tax money)