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12-04-2017 04:00 PM
12-04-2017 05:11 PM
Welcome to the H&R Block community.
You can contribute to the 401(K) of your spouse so long as your joint income is below the contribution phase-out limit for married taxpayers filing jointly. Yes, you can deduct your contribution to your wife's retirement account on your Form 1040 if you make the contribution with after-tax dollars.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)
12-04-2017 05:48 PM
That's fantastic ! Thanks Louis. So, to clarify :
I can create a "solo 401K" account for my wife, and contribute 18,000 amount. My wife does not earn any profit from her business. Next I simply consider this as a deduction in the 1040 filling, from our total income ?
It does not matter that my wife has not made any income from her solo proprietorship business.
Is this correct ?
12-04-2017 06:41 PM
Correct. It will not matter for the personal/elective contribution & the deduction on the 1040 because we're talking about your spouse on a joint return. Yes, the deduction will reduce your joint taxable income.
I did leave out one rule, and that is that you would have to be an employee of your spouse to make contributions. She can't have any other employees to create a solo 401(K) though.
I found some additional information on this topic for you as well:
"The self-employed 401(k) is good for sole proprietorships and partnerships and leaves room for a spouse to join. To qualify, you can't have any employees. If you hire your spouse, you can both contribute $53,000 each per year, and there is no annual paperwork until your account reaches $250,000. When you're 50 or older, you can each contribute $6,500 more per year. Contributions up to $18,000 are tax-deferred (deductible on the 1040 if made with after-tax dollars), and then you can contribute up to 25 percent of business profit-sharing. Funds are available for early withdrawals before age 59½ at a 10 percent penalty or through hardship loans."