Solo 401k to max out pretax savings.

[Ponzu]

I have started a business with a partner (LLC) and we have done well in our first year making 35K each.

We are in the process of setting up our solo 401k.

I am wondering how to set up our business

structure to max out my pretax contributions.

My facts:

I make 450,000 in my day job as a doc.

I max out my workplace 403b (17.5k)

My wife is a stay at home mom with no other income.

I have maxed out my individual FICA taxes.

My inclination is to split my ownership with my wife so that she may max out her 17.5 individual contribution for the year. The downside is paying fica taxes on her income, but the upside is that we can put away 17.5 individually in her name that we couldn't otherwise because of my 403B contribution.

Thoughts?

[ETA Consulting LLC]

(Responding only to the math)

You there may be some benefit. If you pay your wife $19,500 (of which $18,000 is deferred), then you have a FICA of 7.65% to the participant ($1,491.75) and the same ($1,491.75) FICA paid by the employer. So, that $3000 in FICA would be compared to the Federal Income Tax Savings on the $18,000 in deferrals. If you're in a 30% tax bracket, then you save $5,400 in taxes; giving you a net of $2,400 in overall savings.

Good Luck!

[Mike Preston]

You also need to ensure that setting her up as an owner with earned income attributable to her is not contrary to the Internal Revenue Code 1402(a)(5). Have your accountant give you an opinion as to whether or not that section of the IRC is applicable to your situation.