Solo 401k Tax Saving Strategy: Plan Ahead to Save Thousands in Taxes
Now that tax season is over, do you have time to reflect on your finances? For many of us, tax season is also a good time to evaluate our investment strategies. It’s important to aim for the best returns on your investments, but it’s even more so to shelter these returns from taxes. Many real estate investors have discovered the secret of an efficient Solo 401k tax saving strategy. And you can too!
Tax-deferral benefits
The Solo 401k tax saving strategy is simple: investors can shelter a large part of their income into a Solo 401k. In 2015, the maximum contribution limit is up to $59,000 per plan participants. This translates into a significant saving when tax season comes.
With a Solo 401k, you will not have to pay any taxes until you withdraw from the account. This lowers the tax payments upfront while giving you the opportunity to reinvest your pre-tax earnings into other investments.
Solo 401k tax saving strategy
Since your business sponsors the Solo 401k, you can claim the setup and maintenance cost as a tax deductible expense.
You can also choose to dedicate part of your contribution to a Roth Solo 401k account. In this case, the contribution will be taxed this year. However, there will be no more tax at the time of withdrawal, even on the profits and earnings from investing the after-tax amount.
Take action now
If you already have a Solo 401k setup, start making contributions to maximize your tax benefits this year.
If not, consider setting up a Solo 401k as soon as you can. As long as the plan is set up before December 31, it will be eligible to receive contributions for this year. However, give yourself enough time to plan for contributions.
Remember, our retirement planning experts are available to speak to you to provide recommendations based on your situation.
Schedule a free consultation with one of our experts today!