All Forum Posts by: Rahul Gupta

The IRS link- https://www.irs.gov/retirement-plans/one-participant-401k-pl... mentions, "The one-participant 401(k) plan isn't a new type of 401(k) plan. It's a traditional 401(k) plan covering a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as any other 401(k) plan.". 

I am confused about this and want to get some expert opinion here if this means that the contributions can be essentially doubled by the spouse participating in the plan.

The scenario: 

Wife has a daytime job W2 making 80k and has made 10k in 401k contributions at her work place, Husband is full time into real estate reno business(LLC has only wife's name on it) and the business made 100k in profits last year.

If wife can make 12.5 k in Solo 401k contributions(10k already went to 401k through her day time job) and another 25k (25% of 100k), what steps can be taken that can allow the husband make an additional 22.5k as well as 25%?

Thank you 

So it looks like your business can contribute 25k and you could as the employee contribute another $12,500 BUT SPEAK TO YOUR FINANCIAL ADVISOR AND CPA

 Thank you . I will sure talk to an advisor but trying to get a good understanding already and make a list of specific questions to ask them.

So can my husband  who is also a part of the business, also contribute another 15500?

We are thinking of getting the check book Solo 401k , will that work?

Thanks

How much can I contribute to a Solo 401k plan in the following scenario? 80k is in W2 income and 100k is in real estate business income. I already have contributed 10k in 401k at my W2 workplace.

Quote from @Bill B.:

If you plan to have a rental in your new town you could do a tax deferred 1031 exchange of the remaining property to a new rental in your town. If a couple years from now it turned out to be a bad rental you could make it a primary and use the 2 of the last 5 year exemption. 2 caveats. As a 1031 exchange you’d have to own it for at least 5 years, and because it was a rental first you would only get s prorated portion tax free. But it’s still better than 100% taxable.  

Got it. Thank you  

Quote from @Bill B.:

I THINK you screwed up. I think you could have sold the 2018 home tax free thsi year and then the 2020 house in 2 years tax free. For some reason I remember there being a 2 year separation requirement for primwry homes. BUT, I could be wrong, ask your tax guy. You also MIGHT be able to file separate tax returns?

sorry I had less of an answer than I thought I did when I started responding. Good luck. 
. 
ps. Obviously you sell both claim the one with largest gain if forced to choose. 

Thank you for the reply. We did not think bout selling the house we bought in 2018 up until a week back. That one is operating as an Airbnb but is starting to make more sense to invest in the city we are in now than to manage the Airbnb from out of state. 

correction in my initial question:
”Total gains from the two houses will be around 220k but we don't know what the laws are around how many primary houses can we have within the last Five years(I wrote two years earlier) to avoid the long term gain taxes. “

We bought our primary residence in 2018, lived there till Mid Dec 2020 and then converted that to Airbnb. We moved to a new state in mid Dec 2020 and bought our primary house there which we sold in January of this year for a 100k profit. I believe we don't have to pay for taxes on the house we bought in Dec 2020 as we lived there for little over two years.
IF we sell off the Airbnb property this month which we lived in since Sep 2018 to Dec 2020, would we have to pay taxes on the capital gain? We expect a gain of 120k

Basically, we had and lived in two primary house in the last 5 years for the minimum of two years each. Total gains from the two houses will be around 220k but we don't know what the laws are around how many primary houses can we have within the last two years to avoid the long term gain taxes.

Thank you

I was able to find the answer online. Thank you

Quote from @Ashish Acharya:

You need to qualify as REPS or have STR with material participation.

Hello, what does "You need to qualify as REPS or haveSTR with material participation." mean?

I asked a question about investing 100% of the profits from the Flips in rental properties. I may not have asked the correct questions at the time so I am attempting to ask again.

If i get 100k profit from flip projects, invest the entire amount as a down payment on a rental property, and the depreciation as well as the deductions come out to to be 100k, would my taxable income be considered 0 for that year?

Thank you for the replies.