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Updated almost 9 years ago, 02/25/2016

User Stats

83
Posts
17
Votes
Erik Kubec
  • Real Estate Investor
  • Denver, CO
17
Votes |
83
Posts

Solo 401k, LLC taxed as a sole prop, tax minimization strategy

Erik Kubec
  • Real Estate Investor
  • Denver, CO
Posted

Hey folks,

Any thoughts on the efficacy of this strategy?:

We own several SFD rental properties held in our names.  We file jointly a 1040.

I have a single member LLC taxed as a sole prop. This LLC holds another property. This LLC has a solo 401k.

The contribution to 1040 gross income (after depreciation et al) via LLC-as-a-sole-prop to our 1040 will be about $4000. Our tax rate on the margin for that is 33%, so $1320 to the IRS.

Let's say that I as the member/employee of the LLC did 100 hours of work on the 3 properties (not the one held by the LLC!!!) at $40 / hr = $4000. So that $4000 becomes an expense item of the properties, thus no $$$ from the properties to be taxed.

Then, through the LLC solo 401k, I choose to defer %100 of the $4000 into that solo 401k.

I believe that I just lowered my tax bill for TY 2015 by $1320.

Anyone see any problems with this?

-Erik

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