Definition of Earnings for Self Employed for Solo K Contribution
Client is a real estate agent and made $26,000 in gross commissions and has $6,000 in business expenses. Can she make a tax deductible Solo K contribution of $20,000 without having to take a W-2 wage? She is a sole owner and files all her real estate income and expenses on a Schedule C. Her husband is an airline pilot and they are looking to defer income but unsure is she must take a W-2 wage to qualify as “earned income” Thank you in advance for your help and expertise.
Permalink Submitted by William Tuttle on Fri, 2022-12-09 23:56
It is never proper for self-employed individuals to receive W-2 wages. They have net earnings from self-employment (self-employed earned income) = business profit – 1/2 SE tax.