Solo 401k for Real Estate Investor

Investor · Lancaster, NY · Member since 2016 · 24 posts · 7 votes

Hi there! I quit my banking job over a year ago and now do REI full time. I am also a RE Agent, mostly for my own deals and for family and friends. I'm interested in learning if my REI income (Sch E) could be shielded by contributing to a Solo 401k - or if I them open myself up to SE Tax; or if I should just focus on my Sch C RE agent income to make those contributions. Any advice would be helpful! And yes, I have a CPA, but There's always more than one way to skin a cat!

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
5y
Originally posted by @Mike Moran:
Hi there! I quit my banking job over a year ago and now do REI full time. I am also a RE Agent, mostly for my own deals and for family and friends. I'm interested in learning if my REI income (Sch E) could be shielded by contributing to a Solo 401k - or if I them open myself up to SE Tax; or if I should just focus on my Sch C RE agent income to make those contributions. Any advice would be helpful! And yes, I have a CPA, but There's always more than one way to skin a cat!

Sch E rental income will not qualify for the Solo 401k. Your sch C should. Also, please talk to your CPA about getting an S-Corp.

@Dmitriy Fomichenko, should be able to help you with solo 401k.
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Justin WindhamPro Member
Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes
5y
@Mike Moran
As Ashish mentioned, schedule E income is passive and does not qualify for Solo 401k contributions, but your income generated from real estate sales would. If any of your schedule E income requires work on your part, you might want to discuss the possibility of converting that to earned income with your CPA. Although this would generally add self-employment tax for you, it might be a benefit if you can contribute to the Solo 401k and generate significant tax-deferred or tax-free earnings inside the plan.
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