[John]

Hello! My CPA just told me solo 401(K) contributions are NOT tax deductible.

Saying whatever I contribute to my solo 401(K) won’t bring my earnings down and I’ll still owe what the balance was before my contribution. Everything I have read says otherwise.

I did hear something along the lines of if I don’t contribute before the end of 2024 I won’t be able to contribute as an employee.

But I could still contribute as an employer up to april 15. But my CPA said I would be able to contribute around $35,000 which would be me contriubting as an employee and employer.

so I’m not quite sure what to believe. She’s also saying that $35,000 wont deduct what I owe for my taxes this year???

Help

[Tristan]

Is your solo tax deferred? I can send you a document to show them once I get back home if you’d like

[Sharie]

Employee contributions are due but 12/31 but employer contributions are due on the tax filing deadline, which is usually April 15th – if you can depreciate more, why not do that?

[Eva]

Hmm it sounds like there might be a mixup somewhere?
Solo 401k contributions absolutely can be tax deductible, it just depends whether you’re making traditional (pre-tax) or roth (after-tax) contributions.

If you make a traditional employee contribution, it reduces your taxable income for the year you contribute, but you have to get that in by Dec 31 2024.

Then you can also make an employer contribution, which is based on a percentage of your net SE earnings, and that can be made all the way up to your tax filing deadline next year.

Both of those should lower your taxable income for this year if they’re traditional contributions.

If your CPA is saying the $35K you’d contribute won’t reduce your taxable income, it makes me wonder if they’re assuming you’re doing Roth contributions?

You might want to double check with them whether they’re treating it as roth or traditional, because that makes a huge difference.

& you’re right that you can only make the employee part by the end of the calendar year, but the employer part can wait until tax time.

[Elena]

Traditional Solo 401k contributions are deductible from your income tax but not your SE tax (about 15% if you are filing as sole proprietor).

So, you need to figure out what portion of your taxes is SE tax.

[Chris]

Possibly… Possibly… You have too many deductions and you’re in the 0% tax bracket or even 12% tax bracket it doesn’t really matter.

Maybe look into a Roth solo 401k

[Krista]

Who created all these rules? So confusing. Even CPA doesn’t know what they are talking about.

The major question is who checks what’s right and what’s wrong?

Sometimes I feel like even IRS has no clue.

[Author]

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