BlogMaking Solo 401k Contributions for Wife and Husband Partnership Inlcuding LLC Taxed as a Partnership
Posted about 1 year ago

Making Solo 401k Contributions for Wife and Husband Partnership Inlcuding LLC Taxed as a Partnership

Each spouse’s ability to contribute to the solo 401k plan is based on each spouse’s respective own earned self-employment income (i.e. K-1 for each spouse). Effectively, when the self-employed business sponsoring the solo 401k is a partnership including an LLC taxed as a partnership, each partner is acting independently of the other partner with regard to contributions., age, etc. As long as you and your wife are reporting your own self-employment income (i.e each of you have a K-1 from the self-employed business), you both can contribute to the Solo 401k.

For example, each partner is able to make both employee and employer contributions based on each partner’s own situation (i.e. each partner’s own age, own self-employment income, etc.).

Moreover, each partner may contribute both employee and employer contributions in whichever amount and percentage that such partner wishes to make without regard to contributions made by the other partner(s) (of course, subject to the contribution limits, etc.).

Finally, when a partner makes pre-tax contributions (whether employee or employer) such contributions are reported on such partner’s own 1040 so only that partner will enjoy the tax-reduction benefits of making such contributions. 

For a self-employed business taxed as a Partnership, the ability to contribute is based on the self-employment compensation for each of you (i.e. line 14 of K1 LESS one-half of the self-employment tax).

Since a solo 401(k) plan is an owner only plan it is not subject to the testing rules that apply to full-time employer plans. As such, contributions may be made by just one participant in the Solo 401(k) plan (e.g., do not have to be made in the same percentages, etc.).

One may elect to not contribute even if you or your spouse is reporting your self-employment income.

Published in Member Blogs, Uncategorized

Comments ( 1 )

  1. Hi Mark –

    Our business is an LLC and filed with a Schedule C. We receive 1099s in the name of our business (not my husband’s name). I do all the administrative work for the business so I do work in the business. Since it’s not a partnership with k1s, or w2s, how do we calculate his contribution and my contribution? I understand the overall limits…. just not how to calculate my contribution as the spouse specifically.

    Thanks!
    Angie
    My Solo 401 client 🙂