My Solo 401k Financial, a provider of self-directed 401(k) plans for self-employed individuals, reminds that demographic that Solo 401(k) plans now qualify for up to $1,500 in tax credits under the SECURE 2.0 Act.
“The auto-enrollment tax credit provides substantial incentives for self-employed individuals to open a Solo 401(k) or even upgrade an existing plan in order to be able to claim the credit.”
Mark Nolan, My Solo 401k Financial
“The auto-enrollment tax credit provides substantial incentives for self-employed individuals to open a Solo 401(k) or even upgrade an existing plan in order to be able to claim the credit,” said Mark Nolan, Founder and Chief Operating Officer Carlsbad, Calif.-based My Solo 401k Financial. “We are pleased to now offer Solo 401(k) plans eligible for this valuable tax credit to our clients.”
A Solo 401(k) plan is a retirement account for self-employed individuals or business owners with no full-time employees, but IRS rules say the plans can be used to cover the business owner and his or her spouse. There are no age or income limits, but like most retirement plans, contribution limits can change annually. One key advantage of these plans is that the employer-participant is not required to perform nondiscrimination testing because there are no employees to consider, whether non-highly compensated or otherwise.
While there is no requirement to make annual solo 401(k) contributions to claim the tax credit, those who do wish to make contributions have access to the generous annual contribution limits—for those who sign up by December 31, 2023, they will be able to contribute up to $66,000 for those under age 50 ($73,500 for those 50 and older) for the 2023 tax year any time up until their tax return deadline (including extension) in 2024.
The solo 401(k) plans from My Solo 401k Financial now qualify for the auto-enrollment tax credit in addition to other features:
- Pre-tax, Roth, and even Mega Backdoor Roth Solo 401k Contributions
- 401(k) Participant loans up to $50,000
- Alternative investments like real estate, private equity, private placements, notes, and precious metals among many others
“This provides even more compelling reasons for sole proprietors, independent contractors, freelancers, solopreneurs, and other small or single-employee businesses to establish a solo 401(k) plan,” said George Blower, Principal and General Counsel. “The tax advantages combined with the auto-enrollment credit provide significant incentives to encourage retirement savings.”
Eligible business owners can sign up for a solo 401(k) plan—or amend an existing solo 401(k) plan—by December 31, 2023, and start claiming tax credits beginning in 2023.
SEE ALSO:
• IRS Reminds Retirement Savers of RMD Deadlines, SECURE 2.0 Changes