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Sole Proprietor Deduction


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Suppose you have a sole proprietor who sponsors a DB and 401(k) plan. He is the only participant in both plans. Both plans have been in place for many years and he has been profitable for many years. He is now winding down and has schedule C profit of only $45,000. He has funded $24,000 salary deferrals to the 401(k) plan. The DB minimum is $0 but has room to fund $45,000 or more.

Can he fund and deduct $45,000 - 1/2 SE tax to the DB?

Generally, salary deferrals are not considered for deduction purposes.

Thanks

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