If you look at most of the retirement plan contribution limits for 2014, you notice that they look familiar. Oh yeah, they are almost all the same as 2013!

Because of the way the IRS and Congress adjust these limits for inflation, there are many years when even if inflation ticked up a little, there is not enough of a jump to raise the maximum contributions.

But one of the few exceptions in 2014 is the maximum contribution limit to a solo 401K plan. The maximum has jumped $1,000 to $52,000, up from $51,000 in 2013. For someone self-employed in 2014, to reach the maximum limit you have to have income from the business of $260,000 (you can contribute 20% of your net business income to the 401K if you are self-employed.) Now for a C or S Corporation, which is based on wages, a shareholder employee can contribute the $52,000 on only $138,000 of wages, because as an employee the shareholder can contribute 100% of wages up to $17,500 as an employee deferral, and the corporation can contribute 25% of the wages up to $34,500 as an employer contribution for the employee (meaning wages have to be $138,000 to qualify for the maximum contribution.)

Anyway, this is one time when something going up (besides the stock market) is actually a good thing this coming year; now you just have to earn enough income to deduct the maximum retirement contributions. If you can, isn’t it worth a nice tax break paying yourself!

If you want to know more about this, call or email me and we can talk about it.

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