self employed 401k contribution when net loss

[HJ Wang]

Hi, if my self-employment, single member LLC is at net loss this year, and I am the owner, can I still contribute to my solo 401k? I understand I can't make the company contribution because of net loss, but what about my individual contribution? If I can, will that make the taxable income even lower?

[Dmitriy Fomichenko]

Originally posted by @Ashish Acharya:

Originally posted by @HJ Wang:

Hi, if my self-employment, single member LLC is at net loss this year, and I am the owner, can I still contribute to my solo 401k? I understand I can't make the company contribution because of net loss, but what about my individual contribution? If I can, will that make the taxable income even lower?

 If you have a net loss, you don't have taxable income to lower it.  However, if you were just trying to harness more non-passive losses via your business, you could do a contribution if you convert your entity to an S-corp and pay yourself an optimized wage. You have to work with a professional to optimize your wages for QBI deduction/payroll tax saving purposes. 

 @Dmitriy Fomichenko, isn't that correct? Contributions from S-corp are based on your Wages, not net income. 

Correct Ashish, in the case of an S-corp. wages are considered compensation. It may not make sense in his case, but that is a possibility to discuss with a CPA.