I earn over 200,000 a year and maxed out my elective 401K deferral with my employer at 13,000, with no company match to speak of.

I also make 20,000 moonlighting as a indepedent contractor. I want to put all of the 20,000 into the solo 401K plan but am confused if all of it is dedutible. when i do turbotax it lets me deduct the whole 20,000 as an adjustment to income for a solo401K. Is this correct? am i not limited to deducting 25% of the compensation + elective deferrals (which would we zero for me since I already maxed out deferrals with my real job) . Very confused. I can truly deduct and put away all of my moonlighting in a solo401K than i will moonlight twice as much. please help.

Zip Code: iam4uk5342@aol.com

If you contributed $13,000 into your 401(k) plan at work, you're not eligible to contribute another $13k as "salary deferrals" into your Solo 401(k). Instead, the amount you can contribute is limited to just 20% of your net self-employment income, or approximate $4,000 in your case, depending on the expenses you'll claim against that income.

The Solo 401(k) only makes sense for individuals who are not able to contribute the max into a 401(k) plan through another employer.

If you're married, and your spouse earns $20k as an indepedent contractor, and earns no other income during the year, then the Solo 401(k) would allow your spouse to sock away almost $17k from the $20k she earned into a pre-tax account. That's a pretty good deal!!

Zip Code: cpa@mdtaxes.com