Expert: Allen - 5/24/2010

Question
I have 2 401k plans. One is a solo 401k plan (sole proprietor) and the other is a 401k plan at my employer. My income at my employer maximizes my FICA tax contribution. For purposes of calculating my Net Income for the Solo 401k contribution do I still deduct 1/2 of self employment taxes from my self employment income, even though I maxed out the FICA at my other employer?

Answer
You would still deduct 1/2 of the self employment tax. However this will only be the Medicare tax of 1.45%. The figure comes from Schedule SE which takes into account Social Security taxes paid by you where you are a salaried employee.

Bear in mind that you can only contribute a total of $16,500 (or $22,000 if you are 50 years old or older) to the 401k portions of both plans. You can still make a profit sharing contribution to your plan unless you are a more than 50% owner of the company where you are salaried.