Comparing Self Directed IRA vs. Solo 401k

 It is no secret that Self Directed solo 401K is has more advantages when compared to Self Directed IRA. There are a few reasons for this;

You can borrow from your Solo 401k

With a Solo 401 k you are allowed to borrow from your plan. This feature is something that comes in handy for many participants in the plan.The maximum amount you can borrow from the Solo 401k plan is 50% of your balance or $50,000 whichever is less.  On the other hand it is not possible to borrow any money from your Self Directed IRA and you may even incur a tax penalty if you take any money from your plan before reaching the age of 591/2. When it comes to borrowing money, it is clear that Solo 401k beats out Self Directed IRA.

You can contribute more on your Self Directed IRA vs. Solo 401k which has limits

In the comparison, Self Directed IRA vs. Solo 401k, the Solo 401k provides the added benefit of allowing you to contribute a lot more than a Self Directed IRA.The Self Directed IRA has a maximum contribution limit of $5,500 and the Solo 401K enables you to contribute up to $51,000 which adds up to nearly 10 times more than the allowed contributions for the Self Directed IRA.

With the Roth IRA, the maximum contribution is $5,500 and $6500 if you are over the age of 50 while the Roth Solo 401k sub-account allows you to contribute $17,500 with an additional $5,500 as a catch-up contribution

No need for Custodian Consent

Also a custodian is not required to hold your assets as you can act as a Trustee for your Solo 401k assets, giving you the added advantages of reduced processing times and processing and holding fees are eliminated completely.

Self Directed IRA is subject to UBIT

When it comes to the certain taxes that are involved in any of the two plans, Self Directed IRA vs. Solo 401k, Solo 401k fares a lot better. The Solo 401k is not subject to the UBIT (Unrelated Business Income Tax).While a Solo 401k is not subject to the payment of UBIT tax, a Self Directed IRA is subject to tax whenever a person uses financing of debt to make a real estate investment. This means that a person who is on a Solo 401K can invest in real estate using refinancing of debt without attracting any tax payments on their 401k plan.