Comments on: Self-Employed Retirement Plans: Solo 401(k) Plan

By: Ric Hinkie

Ric Hinkie — Thu, 15 Oct 2009 00:59:45 +0000

Dalton, I have an all paid for rental home in my IRA. The IRA owns it, and rent is paid to the administrator. Entrust Midwest LLC is a very reasonable and trustworthy administrator. They pay the insurance, taxes, etc. I still find the renters, but can not handle any of the money.

The cool thing is that the rent goes in like an extra IRA contribution, that I could not make myself as I am maxed out. When I need to take a distribution from the IRA, the money will come out to me, but my principal…in this case the house is still an asset that will always be there. I can also always sell it and the appreciation adds to my IRA’s value. The only down side is the expenses and appreciation are not deductible, but the other benefits outway this.

By: Patrick

Patrick — Wed, 14 Oct 2009 18:46:28 +0000

David, Your situation is fairly complicated and requires a professional tax advisor and/or financial planner – someone who can dig into your books, run some numbers, and come up with a plan to help you both now and in the future.
I recommend looking for someone in your area that has experience working with situations similar to yours.

By: David

David — Wed, 14 Oct 2009 18:42:14 +0000

What would be the best plan for me? I am a 51 year old self-employed rancher and investor. The ranching business generally reports a loss. Most of my income comes from investments in stocks, bonds, oil & gas both working interest and royalty interest. I also have some income from a bookkeeping business on schedule C. I am expecting a large amount of income on schedule E for this year and the next. I’m looking for the best way to defer the taxes on my income for the next couple of years.
David

By: Patrick

Patrick — Sat, 09 May 2009 15:44:08 +0000

Mike: I don’t believe there are any restrictions that prevent you from having both plans, but there are restrictions regarding how much money you can invest in tax deferred retirement accounts each year. I’d recommend visiting a professional CPA or other person well versed in tax laws for more information. Best of luck to you.

By: Mike

Mike — Sat, 09 May 2009 02:38:02 +0000

I’ve already contributed to a SIMPLE IRA for 2009. Am I allowed to also contribute to a solo 401(k) during the same tax year?

By: Sham

Sham — Sat, 18 Apr 2009 17:20:20 +0000

Since I didn’t open solo 401(k) before 12/31/08 and I made contribution to 401K (wrong advice from my broker) in 2008 return & submitted. Now, can I file 1040-x to switch from solo 401 K to SEP IRA to recify the mistake.

Thanks,

Sham

By: Patrick

Patrick — Thu, 12 Feb 2009 16:49:13 +0000

Greg: Yes, you would have had to establish the Solo 401(k) account by Dec 31, 2008 to take advantage of it for your 2008 taxes. However, as long as it is established, you can contribute to it up to the tax deadline to lower your 2008 tax obligations.

If you missed the deadline, I would encourage you to start looking for a company to maintain your solo 401(k) now so you don’t get rushed trying to do it at the end of this year.

By: Greg

Greg — Thu, 12 Feb 2009 16:44:54 +0000

Would I have had to establish a solo 401k during 2008 to take advantage of it for my 2008 taxes?

By: Ric

Ric — Wed, 31 Dec 2008 00:20:04 +0000

Yes, you can have realestate in an IRA. I have a rental house in mine and my wife has one too. The advantages are that the rental income becomes an added contribution to the IRA that is not subject to limits of contribution. It is treated like it was a dividend or gain in stock price.

The key is to find a place that will handle all the details for you at a low price. You can not accept money from the renters directly, it must go to a manager “for the benefit of YOU and your account number must be on the checks”.

By: Patrick

Patrick — Sun, 21 Dec 2008 15:49:58 +0000

Dalton: I believe it can be done, but I don’t know the details. Here is a little information about it: http://www.realtor.org/archives/featuresept03ira

After reading the article, it appears as though it is complicated and out of the scope of my knowledge. This article is for general information and I’d recommend contacting an accountant or retirement plan specialist for your specialized needs.