I have Schedule C income and W-2 job with 401k
If I contribute $10k to solo 401k vs $10k to employer 401k, which one would offer me the biggest tax advantage in the immediate upcoming tax year?
- Solo 401k contribution would reduce QBI deduction
- But, can I designate the $10k to be an EMPLOYER CONTRIBUTION to reduce self employment tax? If it went in as employee deferral, it would not do this?
- I think with the self employment tax reduction I'd actually have a lower tax bill
- Am I missing anything?
- All of this would be in 22% marginal tax bracket
Posted by Dry-Bunch-4379
4 Comments
401(k) contributions do not reduce SE taxes. Contributing through your employer would be better.
> Solo 401k contribution would reduce QBI deduction
Yes. Makes it worse.
> But, can I designate the $10k to be an EMPLOYER CONTRIBUTION to reduce self employment tax? If it went in as employee deferral, it would not do this?
No, for self-employed individuals, employer contributions do not reduce SE tax. From [LaFlamme v. Commissioner](https://scholar.google.com/scholar_case?case=15659631144946893082):
> Except for the special rule in section 404(a)(8), a self-employed taxpayer’s contribution is not an expense attributable to the taxpayer’s trade or business. Petitioner points us to no authority, and we have discovered none, that provides that the special rule in section 404 (a)(8) applies outside the context of that section. Petitioner’s pension contribution is not attributable to her trade or business. Thus, petitioner’s pension contribution is not deductible on her Schedule C.
consider employer contribution to solo 401k, reduces self-employment tax. employee deferral doesn’t help there. self-employment tax savings might outweigh qbi deduction. consult a tax pro.
Is there an employer matching contribution?