Solo 401k Tax Benefits and Setup Guide

Solo 401(k) provides maximum retirement savings for self-employed individuals: Contribution Limits (2024): Employee Deferrals: Up to $23,000 ($30,500 if age 50+). Employer Contributions: Up to 25% of compensation (20% for unincorporated businesses). Total Limit: $69,000 ($76,500 if age 50+) or 100% of compensation. Tax Benefits: Current Deductions: Contributions reduce current taxable income. Tax-Deferred Growth: Investments grow tax-free until withdrawal. Roth Option: After-tax contributions for tax-free retirement withdrawals. Eligibility: Must have self-employment income. No employees (except spouse). Business can be sole proprietorship, LLC, S Corp, or C Corp. Setup Process: 1. Choose provider (banks, brokerages, or specialty firms). 2. Open account and fund by year-end for current year deduction. 3. File Form 5500-EZ if account value exceeds $250,000. Loan Feature: Can borrow up to $50,000 or 50% of account value. Must repay within 5 years (except for home purchases). Advantages Over SEP-IRA: Higher contribution limits. Employee deferrals plus employer contributions. Loan option available. Deadline: Contributions due by tax filing deadline (including extensions).