Self-Directed IRAs, Checkbook-Control IRAs, and IRA-LLCs are powerful alternative investment vehicles with great tax benefits. However, for those that qualify, Checkbook Solo 401K Plans are far better vehicles for retirement-account real estate investing. In this post will introduce the fundamentals of Checkbook Solo 401k Plans and their benefits.
What is a Checkbook Control Solo 401k Plan?
The tax code provides for 2 types of tax-advantaged retirement plans: (1) Individual Retirement Arrangements, referred to as IRAs and (2) Employer Sponsored Plans, such as 401(k)s, referred to as Qualified Plans.
IRA-based retirement accounts are relatively simple plans with limited flexibility. Qualified Plans are exceedingly complex, but can be very flexible and provide very attractive features. A Completely Self-Directed Solo K, or Checkbook 401k, combines the simplicity of IRAs with the flexibility of Qualified Plans.
What are some powerful Solo 401k investing and tax features?
- Tax deductions of up to $60,000 per participant for 2017. Going up in 2018.
- Solo 401k Pre-tax, after-tax, and Roth contributions
- Solo 401k Mega Backdoor Roth Strategy
- Employee Salary Deferral and Employer Profit Sharing Contributions
- Solo 401K Loans to be used for any purpose you’d like
- No UDFI tax on Solo 401k real estate investments
- Purchase cash-value life insurance with pre-tax funds
- Asset protection
- No need for a custodian
- Checkbook-Control without an LLC
How do I qualify for a Checkbook-Control Solo 401K?
To qualify for a Checkbook Control Solo K you (a) must have some form of self-employment income and (b) must not have W-2 employees that work more than 1,000 hours per year, other than business partners and spouses.
If my spouse works for me can I still have a Checkbook Solo 401(k)?
Yes, you certainly can. In fact, by employing your spouse you can double your Solo K benefits, so go ahead and employ him or her.
If I have a partners, can I have a Solo 401k?
Yes, if you have partners that work in your business you can still have a Solo 401k.
What assets can a Checkbook Solo 401k invest in?
Examples of Solo 401k investments are:
- Solo 401k Real Estate
- Solo 401k Private Lending
- Solo 401K Virtual Currency (Bitcoin, Ethereum, Ripple)
- Solo 401k Litigation Finance
- Solo 401k Precious Metals and Coins
- Solo 401k Cattle and Livestock
- Solo 401k Tax Liens and Deeds
- Solo 401k Merchant Cash Advance
- Solo 401K Private Equity
- Solo 401k Notes, Mortgages, and Deeds of Trust
How do I set up a Checkbook Solo 401k Plan?
Checkbook Solo 401k Plans require specially drafted IRS-approved plan documents. With those documents you set up a bank account and begin investing. The actual implementation process has many steps – but the core concept is exceedingly simple.
What is the deadline for establishing a Solo 401k Plan?
A Solo 401k plan must be established before the end of the tax year, by December 31. For a Solo 401k plan to be considered established, the plan documents must be signed before year-end. It does not have to be funded by then. The Solo 401k Bank Account can be opened after the year-end, as well.
Checkbook Solo 401K Plans are incredibly powerful investing vehicles for those that qualify. They offer benefits and features greatly exceeding those of Self-Directed IRAs – especially for real estate investors – but have some additional requirement to qualify and maintain.