Emergency: I have to purchase a primary residence ASAP (ideally, in next 6 months) and must keep pretty much as much cash on hand as possible for a large downpayment. However, I also earned money from a side biz for the first time in 2025 and am worried that I am just being dumb by surrendering to paying a straight 30% into taxes.
I am interested in any and all "one weird tricks" to reduce my tax liability even by like $500.
2025 Income
W-2 – ~$81k total wages ($89k salary), standard withholding from paycheck
1099-NEC from side biz – $18k gross income sole proprietorship (first year), paid $6500 in estimated taxes, not many business expenses
1099-INT – $3.4k (HYSA for a lot of cash on hand)
I have been reading about Solo 401k (& 401k loans.) It sounds like these are my two options:
- Gross $18k, pay $6.5k in taxes = like $11k towards my down payment
- Gross $18k, put the entirety of my sole proprietorship earnings into Solo 401k, take out 50% Solo 401k tax free loan when I buy house = at least $9k towards my down payment plus at least $9k remaining in Solo 401k
The latter seems like a better option than just "losing" the $6500 I earned, but am I misunderstanding something here?
Any additional weird ideas? I have completed essentially all basics of PF (max standard 401k, HYSA, cashback credit card paid in full each month) and live extremely frugally, just looking for next moves.
Am I stupid for not putting all of my side income into a Solo 401k?
byu/bilalgag inpersonalfinance
Posted by bilalgag
2 Comments
You’re not stupid but the Solo 401k loan thing might not work as smoothly as you think – most providers have waiting periods before you can take loans and some don’t offer them at all
Also consider a SEP-IRA if you want something simpler to set up quickly, but yeah definitely put that 1099 money somewhere tax-advantaged if you can swing the cash flow
Solo 401k has a contribution limit of 25% of net income for that business.