Harvard Law Attorney George Blower leads an in-depth discussion of the 2023 and 2024 Self-Directed Solo 401k Contribution Limits for self-employed businesses taxed as S-corporations, C-corporation, LLCs taxed as S-corporations/C-corporations including:

*​**Free Solo 401k*** Learn how opening a Solo 401k in 2024 will qualify you to claim a $1500 tax credit including a $500 credit on your 2024 taxes and then another 2 years after that for a total of $1500.

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The solo 401k plan, commonly referred to as self-directed Solo 41k is the retirement plan of choice for self-employed individuals or owner-only businesses including for the features highlighted below:

-The highest contribution limits for any defined contribution plan including up to $69,000 (or even $76,500 if you are 50 or older) for 2024.

-The ability to make pre-tax, Roth, and even Mega Backdoor Roth contributions.

-401k participant loans of up to $50,000

-Invest with checkbook control in real estate, cryptocurrencies, notes, private placements, and other types of alternative investments.

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For many individuals who are self-employed or own a small business, saving for retirement can often be a challenge. However, a Solo 401k plan can be a great option for those looking to maximize their retirement savings while also taking advantage of potential tax benefits. If you own a business structured as an S-corp, C-corp, or LLC taxed as an S or C-Corporation that pays you a W-2 salary, you may be eligible to contribute to a Solo 401k plan.

A Solo 401k plan allows self-employed individuals to contribute both as an employer and as an employee, potentially maximizing their retirement savings. In 2023 and 2024, the contribution limits for Solo 401k plans are as follows:

– As an employee, you can contribute up to 100% of your earned income or $19,500, whichever is less.
– As an employer, you can contribute up to 25% of your salary or $58,000, whichever is less.

Additionally, individuals aged 50 and older can make catch-up contributions of up to $6,500, bringing their total contribution limit to $64,500.

One of the main benefits of contributing to a Solo 401k plan is the potential for significant tax savings. Contributions made as an employee are tax-deferred, meaning that they are not subject to income tax until they are withdrawn in retirement. Employer contributions are also tax-deductible, reducing your taxable income for the year in which they are made.

Furthermore, for tax years 2023 and 2024, individuals who contribute to a Solo 401k plan may also be eligible for a $1500 tax credit. This credit is available to small business owners who have fewer than 100 employees and contribute to their employees’ retirement savings plans, including Solo 401k plans. The credit is based on a percentage of the contributions made to the plan, up to a maximum of $1500.

To take advantage of the tax credit and maximize your retirement savings with a Solo 401k plan, there are a few things to keep in mind. First, you must ensure that your plan is set up correctly and in compliance with IRS regulations. Working with a financial advisor or tax professional can help ensure that your plan meets all requirements.

Additionally, it’s important to regularly review and adjust your contribution amounts to take full advantage of the maximum limits allowed. Finally, be sure to keep accurate records of your contributions and any tax credits claimed, as this information will be needed when filing your taxes.

Overall, a Solo 401k plan can be a valuable tool for self-employed individuals and small business owners looking to save for retirement while also benefiting from potential tax savings. By taking advantage of the contribution limits and tax credits available, you can set yourself up for a secure financial future in retirement.