After-Tax Contribution
Hello-
Client has W2 job where they maxed out their 401k. They also have about $23K of net Schedule C. They can open up a new Solo 401k and contribute roughly $4K as an ER contribution. How does the after-tax (mega back door Roth) contribution limit work? Can they then do roughly $19K in after-tax contribution ($23K – $4K)?
Thank you!
Permalink Submitted by Alan - IRA critic on Thu, 2025-03-13 12:39
After tax non Roth contributions are not linked to the elective deferral limit, but they are subject to the annual additions limit of 70k per plan. The 70k limit applies to the total of elective deferrals (pre tax and Roth), employer matching, forfeitures, and after tax contributions.
Therefore, if the W-2 employer offers after tax contributions, or the solo K provider offers them (many do not), after tax contributions can be made to either plan up to the annual additions limit. The W-2 employer might cap these contributions if they offer them, to avoid having higher income participants failing the ACP test.