Investors Are Using Recent Increase in Solo 401k Contribution Limits To Shelter More Income From Taxes

Solo 401k Contribution Limits

Solo 401k Contribution Limits

Recently there has been a growing interest in the Solo 401k retirement plans, due to its increased contribution limits (result of changes in the IRS Rules).  With all the talk of increasing tax rates, many want to shelter as much of their income as they can.  The increased Solo 401k contribution limits now offer greater potential to do so.

This year the IRS increased the maximum Solo 401k contribution limit to $56,500 for owners over the age of 50.  The Solo 401k contribution limit for those under the age of 50 is $51,000 per year.

This increases the annual contribution limit by $1,000 from last year, providing a greater incentive to those who wish to shelter more of their income.

The Solo 401k Plan was designed for the self employed and the small business owner.  Those who qualify can make contributions as both employee and employer.  The sum of these two parts- the employee salary deferral contribution and the employer profit sharing contribution, make up the maximum Solo 401k contribution limit.

For 2013, the contribution limit for employee salary deferral is $17,500 for those who are under the age of 50.  For those age 50 and over, a “catch-up” provision allows an additional $5,500, making the maximum contribution limit $23,000.

Depending on the structure of the business, an additional 20% or 25% of the compensation makes up the employer profit sharing contribution.  A sole proprietorship can defer 20% of the compensation; a corporation can defer 25% of the compensation.

If both spouses are involved in a business, then the recent IRS increase in Solo 401k Contribution Limits makes it even more advantageous.  If receiving compensation from the business, the spouse of the business owner can also participate in the plan, nearly doubling tax deduction!

Self-Directed Solo 401k Plan from Sense Financial offers many benefits such as:

  • Total (Checkbook) Control over your retirement account 
  • High Contribution Limits
  • Loan Feature (allowing tax free access to funds in your retirement account, which can be used for any reason)
  • Roth Solo 401k (this optional feature makes tax free investing possible)
  • Exempt from UDFI Tax on financed real estate within Solo 401k

Those who qualify can take advantage of many benefits including high Solo 401k Contribution Limits, which increases the opportunity to shelter more income.

For more information on the Solo 401k, please contact:


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