Physician and Solo 401 as Real Estate Agent

Scottsdale, Arizona
Personal Finance
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Physician and Solo 401 as Real Estate Agent

James Meyer
Member since 2024 · 3 posts · 5 votes

Hi,

I am a physician employed at a university hospital with W2 income. I have 403 and 457 retirement accounts through my employer.

I plan to get my real estate broker license this year and I wonder if I am eligible for solo 401 as a real estate agent. 

I would appreciate your input. Thanks.

Jim


 

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Brett SynickyPro Member
Solo 401k and SDIRA Consultant · Orange, CA · Member since 2013 · 873 posts · 497 votes
2y
Quote from @James Meyer:

Hi,

I am a physician employed at a university hospital with W2 income. I have 403 and 457 retirement accounts through my employer.

I plan to get my real estate broker license this year and I wonder if I am eligible for solo 401 as a real estate agent. 

I would appreciate your input. Thanks.

Jim


 


 Hello Jim, you need legitimate self employment activity and no w2 employees (other than spouse) working more than 500 hours annually.  The business that sponsors the Solo 401k would need to be in business and earn money.  IRS expects people to have up and down years in business but the intent would need be to make money.  Also as others have stated you would not be able to take advantage of the employee and employer contributions if the business doesn't make money.  You could however roll over your 403 and 457 into the Solo and start make investments.  

If you don't intend to operate an actual real estate sales business even if super part time then you're better off looking at a Self Directed IRA. The downside is if you invest in real estate the income from the financed portion of the real estate will be subject to UBIT TAX.

Talk to a qualified tax professional before doing anything of course.  

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  • Jonathan Bock
    Accountant · Bryn Mawr, PA · Member since 2023 · 409 posts · 321 votes
    2y

    @James Meyer

    Jim like everything in personal finance it depends can you tell us some more case details and what you are trying to accomplish?  No one can give personalized advice on the forum its just for discussion and conversation aka entertainment

    Jonathan Bock, CPA 

    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    Do you have a passion for being a real estate broker / real estate sales person?

    You would likely be allocating hours where you can make $100+ an hour as a physician to a lower rate(unless you are a rockstar broker).

    If you want to invest in real estate, stop contributing to your 403B and just buy a property every year. 

    Not knowing your full financial picture, I would have to imagine a physician can retire easily with a 5-10 year plan.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
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    0Reply
  • Brian EastmanPro Member
    Self Directed IRA & 401k Advisor · Wenatchee, WA · Member since 2014 · 2k+ posts · 2k+ votes
    2y

    @James Meyer

    As a realtor you would be classified as self-employed and therefore eligible to sponsor a Solo 401(k) - assuming you do not own or control any other business that has employees.

    Your employee deferrals are capped at $23,000, or $30,500 if you are over age 50, across all plans you participate in.  If you are maxing out with the W-2 associated plans, your Solo 401(k) would be limited to accepting employer profit-sharing contributions based on your real estate commission earnings.

    There are several solid professionals who specialize in Solo 401(k) plans here on BP.  Get on the phone with one and see what your situation may allow for and whether there will be a benefit.

    1Reply
  • James Meyer
    OP
    Member since 2024 · 3 posts · 5 votes
    2y

    @Brian Eastman @Account Closed Thanks everyone for your inputs. 

    My situation is that I wonder if I can use being a real estate agent as a strategy to save on taxes by creating a solo 401k. I doubt if I will be creating any income as a real estate broker. 

    Another scenario I can think of is that my wife who is a stay-at-home mom can be a real estate agent and help with reducing tax burden by solo 401k. We file a joint tax return.

    I put this question here to see if this is even practical or possible to pursue? Any help would be really appreciated. Happy to dial a call to someone who you think can help achieving this goal of mine if doable. 

    Thanks again.

    1Reply
  • Jonathan Bock
    Accountant · Bryn Mawr, PA · Member since 2023 · 409 posts · 321 votes
    2y
    Quote from @James Meyer:

    @Brian Eastman @Account Closed @Basit Siddiqi @Jonathan Bock Thanks everyone for your inputs. 

    My situation is that I wonder if I can use being a real estate agent as a strategy to save on taxes by creating a solo 401k. I doubt if I will be creating any income as a real estate broker. 

    Another scenario I can think of is that my wife who is a stay-at-home mom can be a real estate agent and help with reducing tax burden by solo 401k. We file a joint tax return.

    I put this question here to see if this is even practical or possible to pursue? Any help would be really appreciated. Happy to dial a call to someone who you think can help achieving this goal of mine if doable. 

    Thanks again.


     This will not work if your intention is using another tax deferred savings vehicle to shield your physicians income from taxation without production from your real estate sales.  Also, as other contributors have noted have you already maxed out your 403 and 457?  

    1Reply
  • Todd Goedeke
    Contractor · Sheboygan, WI · Member since 2016 · 917 posts · 266 votes
    2y

    @James Meyer you may find it beneficial to transfer any existing IRAs or old 401ks to a Solo 401k to avoid UBTI. 
    A good book to read about Solo401ks is from IRA Financial Group owner and tax atty., Adam Bergman. He also has webinars on You Tube on the subject.

    0Reply
  • Brett SynickyPro Member
    Solo 401k and SDIRA Consultant · Orange, CA · Member since 2013 · 873 posts · 497 votes
    2y
    Quote from @James Meyer:

    Hi,

    I am a physician employed at a university hospital with W2 income. I have 403 and 457 retirement accounts through my employer.

    I plan to get my real estate broker license this year and I wonder if I am eligible for solo 401 as a real estate agent. 

    I would appreciate your input. Thanks.

    Jim


     


     Hello Jim, you need legitimate self employment activity and no w2 employees (other than spouse) working more than 500 hours annually.  The business that sponsors the Solo 401k would need to be in business and earn money.  IRS expects people to have up and down years in business but the intent would need be to make money.  Also as others have stated you would not be able to take advantage of the employee and employer contributions if the business doesn't make money.  You could however roll over your 403 and 457 into the Solo and start make investments.  

    If you don't intend to operate an actual real estate sales business even if super part time then you're better off looking at a Self Directed IRA. The downside is if you invest in real estate the income from the financed portion of the real estate will be subject to UBIT TAX.

    Talk to a qualified tax professional before doing anything of course.  

    2Reply
  • James Meyer
    OP
    Member since 2024 · 3 posts · 5 votes
    2y

    Thanks again all for your suggestions. This is very helpful. It seems like there is no easy way out.

    1Reply
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