1040-US: Maximum allowable solo 401(k) deduction

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How do I calculate the maximum allowable solo 401(k) deduction?


Enter 4 in the Compute maximum allowable contribution field to calculate the maximum allowable solo 401(k) deduction. UltraTax CS automatically calculates the maximum deduction using the lesser of 20 percent (.25/1.25) of net earnings from self-employment or $53,000.

If the solo 401(k) plan includes provisions for elective deferrals, mark the Include elective deferral in computing maximum allowable contribution field in Screen Keogh. UltraTax CS assumes the maximum elective deferral amount of $18,000 for 2017 when calculating the maximum allowable contribution. UltraTax CS automatically reduces the $18,000 maximum by any contributions entered in Screen W2 or in a separate Keogh screen made on behalf of the same individual.

Also, if the solo 401(k) participant qualifies to make catch-up contributions, mark the Include catch-up contribution in computing maximum allowable contribution field in Screen Keogh. With this field marked, UltraTax CS automatically calculates the maximum allowable catch-up contribution (if the participant is age 50 by the end of the calendar year) in addition to the elective solo 401(k) plan contribution. Catch-up contributions for all eligible solo 401(k) plans are limited to $6,000 for 2017.

In lieu of calculating the maximum allowable contribution use the Total 401(k) contributions field in Screen Keogh to enter known contributions to the plan. The same limitations apply for purposes of calculating the solo 401(k) plan deduction.

To adjust the amount of self-employment earnings UltraTax CS uses to calculate the self-employment deduction, enter an adjustment in the Adjustment to earned income field in Screen Keogh. Negative entries are treated as subtractions.

Related topic: Keogh, SEP, and SIMPLE contributions FAQs (1040)

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