Retirement Account for Spouse (Paid Via 1099-NEC)

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Topic Author
sandaddiction
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Joined: Thu Nov 30, 2017 4:36 pm

Retirement Account for Spouse (Paid Via 1099-NEC)

Post by sandaddiction »

My wife works for a company which pays here via a 1099 - NEC (she is technically self employed). Through my work, I have an employer funded retirement that is depositing a significant amount annually.

We invest a significant amount of money in real estate, equities, etc. However, we are not taking advantage of any tax deductible or tax deferred accounts for my wife. Are we able to open some type of retirement account that will reduce her taxable income (through her contributions)?

Thank you.
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Duckie
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Joined: Thu Mar 08, 2007 2:55 pm

Re: Retirement Account for Spouse (Paid Via 1099-NEC)

Post by Duckie »

sandaddiction wrote: Wed Jun 22, 2022 9:58 am My wife works for a company which pays her via a 1099 - NEC (she is technically self employed).
<snip>
Are we able to open some type of retirement account that will reduce her taxable income (through her contributions)?
If she is considered a sole-proprietor (Schedule C) and has no employees she has three options:
  • SIMPLE IRA -- Max $14,000 contribution as the employEE for 2022, extra $3,000 if over age 50. Plus extra 3% as the employER. All pre-tax. Easiest plan to implement.
  • SEP IRA -- Max roughly 20% of net income as the employER up to $61,000 for 2022. All pre-tax.
  • Solo 401k -- Max $20,500 elective contribution as the employEE for 2022, extra $6,500 if over age 50. Plus roughly 20% of net income as the employER up to $61,000 total (employEE and employER, not including age 50 extra). EmployER contributions must be pre-tax. EmployEE contributions may be pre-tax or Roth. Depending on the custodian there may be an after-tax non-Roth employER option. This is known as the Mega Backdoor Roth. Requires the most paperwork.
If your joint income is too high to make direct Roth IRA contributions and you are using the backdoor Roth method, then the two IRAs would mess that up.
aristotelian
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Joined: Wed Jan 11, 2017 8:05 pm

Re: Retirement Account for Spouse (Paid Via 1099-NEC)

Post by aristotelian »

Solo 401k would be the best option due to ability to make elective contributions up to $20,500
Topic Author
sandaddiction
Posts: 4
Joined: Thu Nov 30, 2017 4:36 pm

Re: Retirement Account for Spouse (Paid Via 1099-NEC)

Post by sandaddiction »

Thank you very much for all of your help.
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