A major tax benefit available to self-employed individuals and business owners are retirement plan contributions. Contributions to retirement plans can save a significant amount of tax and allow you to save and invest for your retirement. Employer retirement plans have significantly higher contribution limits than traditional and Roth IRA accounts.
If the business has other full-time employees, the owners’ retirement plan contributions may be limited by the extent other employees participate in the retirement plan. Additionally, employer retirement plan contributions must be made on behalf of all eligible employees, not just the owners.
Common employer retirement plan options include 401k plans and SEP IRA accounts.
The amount and timing of contributions varies depending on a number of factors including how the business is taxed, wages to owners and other employees, and the net income of the business.
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Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.