INTERVIEW WITH DMITRIY FOMICHENKO LINDA PLIAGAS
Roth Sub-Account: The Solo 401k Plan comes
with
the
Roth
sub-account,
allowing
plan
participants to make after-tax (Roth) contributions
into the Roth bucket of the Solo 401k Plan. All
investments made using a Roth Solo 401k are
completely tax-free. That means that no income
tax on the rental income received from the property
and no capital gains taxes on the sale of the
property. The potential return on investment using
a Roth Solo 401k could be infinite, especially if
leverage is used!
High Contribution Limits: Plan participants are
allowed to contribute up to $51,000 per year into
the plan. Those over 50 years of age can take
advantage of the additional $5,500 catch-up
contribution. If the spouse of the business owner
is participating in the business, he or she could
also participate, which would make the total
contribution to the plan up to $113,000 per family.
This makes the Solo 401k Plan a great taxsheltering vehicle.
Checkbook Control: Because a Solo 401k Plan is
set up under different IRS rules than an IRA, it
does not require a custodian to hold the plan
assets. With a Solo 401k, clients are designated
trustee of the plan, which allows them to control
their retirement account directly.
A checking
account is opened in the name of the Solo 401k
Trust
and
funded
with
contributions,
or
a
Transfer/Rollover from other qualified plans such
as IRA, 401k, 403b, etc.
Investments and
transactions are as simple as writing a check. This
eliminates the unnecessary delays and fees that
are associated with custodial accounts.
Exempt from UBIT: When an IRA uses mortgage
financing to buy leveraged real estate, this triggers
Unrelated Debt Financed Income (UDFI) – a type
of Unrelated Business Taxable Income (UBTI) in
which taxes of about 35 percent must be paid. But,
with a Solo 401k plan, you can use leverage
without being subject to the UDFI rules and UBTI
tax. This exception offers major tax benefits to buy
leveraged real estate.