Pass through deduction plus solo k

[Michael J Scanlon]

So I’ve been reading the new advanced tax strategies book and according to the book, because I am a 1099 realtor, I can use the pass through deduction to take off 20% of my taxable income.

But according to the first tax strategies book, I can tax shield 25% of my yearly income (up to like 54k) into a self directed 401k.

So, combining those strategies, let’s say I make 100k

I can use the pass through to drop my taxable income to 80k...but can I tax shield 20k based on that 80k or still 25k into a self directed 401k based on the 100k?

Thanks!

[Eamonn McElroy]

Self employed retirement account contributions are an adjustment to QBI.  So in your example:

$100k Schedule C income

$20k Solo 401(k) "employer" profit sharing contribution

$16k QBID ((100-20)x.2)

-----------------

$64k net taxable income (for income tax purposes)

The math is more complex than that, but it gives you the basic idea.