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This is huge for those getting 199A

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  • Avatar grp2c 
    Participant
    Status: Physician
    Posts: 21
    Joined: 08/13/2017
    Think about it practically. SEP IRA and one-participant 401k employer contributions are calculated exactly the same and subject to the same limits. Why would one be a deduction and not the other?

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    Yes I agree that they should be treated the same.  I just thought it was interesting they specifically said “qualified”.

    #189861 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 439
    Joined: 06/12/2017
    2) For docs who will be above phase out, it might be a good idea to do some tax deferred contributions to get into the phase out range.  How ‘low’ one wants to go is a good question to ask the CPA, but tax-deferred would work out well especially for those who need to really go deep by employing a Cash Balance plan (so basically around $150k contribution if your net is around $500k or so), otherwise you would be hopelessly phased out with just a 401k plan.

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    Kon, thanks for sharing this. I had been wrestling with this same idea but was beginning to doubt myself. Glad to see another knowledgeable expert came to the same conclusion.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #189896 Reply
    ReFinDoc ReFinDoc 
    Participant
    Status: Physician
    Posts: 143
    Joined: 01/09/2016

    My take on the Kitces article is that SE Health Insurance payments, HSA contributions and 1/2 self-employment FICA are also subtracted from your QBI.

    In my case, these add up to more than my 401k contribution.

    #190101 Reply
    Avatar robaxin 
    Participant
    Status: Physician
    Posts: 27
    Joined: 09/10/2018
    medical school scholarship sponsor

    Great find. More clarity? Definitely not.

    Guess I have to spend an hour or two to sift through this and decide what to do.

    kitces is on top of his game though and recently I’ve been reading his articles. On the money.

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    It’s even more complicated for you as a direct real estate investor.

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    Curious WCI as to how you are tackling this new find?  I am in more or less the same boat as you i.e. physician income plus other non-service business with high income and solo 401k run as S Corp

    #190260 Reply
    Kon Litovsky Kon Litovsky 
    Participant
    Status: Financial Advisor
    Posts: 888
    Joined: 01/09/2016

    Great find. More clarity? Definitely not.

    Guess I have to spend an hour or two to sift through this and decide what to do.

    kitces is on top of his game though and recently I’ve been reading his articles. On the money.

    Click to expand…

    It’s even more complicated for you as a direct real estate investor.

    Click to expand…

    Curious WCI as to how you are tackling this new find?  I am in more or less the same boat as you i.e. physician income plus other non-service business with high income and solo 401k run as S Corp

    Click to expand…

    On an individual basis.  Everyone is different, and this only makes such differences matter more. It all depends on what types of businesses you have, relative incomes, what types of plans are available/possible, etc, etc.  So everything should be optimized in a holistic fashion, and everyone’s solution might look different depending on the details.  More so than ever before, which will make things a lot more confusing, I’m sure.  But the basics still remain the same – tax tail does not wag the dog, you still have to look at the entire picture before choosing your tools.

    Kon Litovsky, Principal, Litovsky Asset Management | [email protected]
    -401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

    #190261 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4396
    Joined: 05/13/2011

    Great find. More clarity? Definitely not.

    Guess I have to spend an hour or two to sift through this and decide what to do.

    kitces is on top of his game though and recently I’ve been reading his articles. On the money.

    Click to expand…

    It’s even more complicated for you as a direct real estate investor.

    Click to expand…

    Curious WCI as to how you are tackling this new find?  I am in more or less the same boat as you i.e. physician income plus other non-service business with high income and solo 401k run as S Corp

    Click to expand…

    I’m seriously debating paying more fees to change to a 401(k) that allows after tax contributions and in-service conversions.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #190300 Reply
    Avatar spiritrider 
    Participant
    Status: Small Business Owner
    Posts: 1793
    Joined: 02/01/2016

    My take on the Kitces article is that SE Health Insurance payments, HSA contributions and 1/2 self-employment FICA are also subtracted from your QBI.

    In my case, these add up to more than my 401k contribution.

    Click to expand…

    HSA contributions are not subtracted from your QBI, although the resulting reduction in taxable income may separately limit your QBI.

    #190353 Reply

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