Tax Planning with a 401(k)

Whether you're running a full-time business, working a side hustle, or serving your community as a first responder, tax planning should be a key part of your financial strategy. One of the most powerful tools available for self-employed individuals or those earning income outside of a traditional job is the Solo 401(k).

In this guide, we’ll explore how a Solo 401(k) can help reduce your tax burden, grow your retirement savings, and create long-term financial security. Whether you're a freelancer, contractor, business owner, or a firefighter, EMT, or police officer with additional income streams, this tax-advantaged account might be exactly what you need to take control of your financial future.

Why Self-Employed Professionals Need a Tax Strategy

Traditional jobs often come with built-in retirement plans like 401(k)s or pensions. But if you're earning self-employment income - whether full-time or part-time - you're also responsible for your own tax and retirement planning. This means you have more control and more opportunity to shape your financial future.

By taking advantage of tools like a Solo 401(k), you can not only save for retirement but also reduce your taxable income and potentially save thousands each year.

What Is a Solo 401(k)?

A Solo 401(k), also known as an individual 401(k), is designed for business owners or independent contractors with no full-time employees (except a spouse). It offers the same benefits as a traditional 401(k), but with even higher contribution limits and more control.

For 2025, you can contribute up to:

• $23,000 as an employee (or $30,500 if you're 50+)

• 25% of your net self-employment income as an employer

• Totaling up to $69,000 ($76,500 if age 50+)

These contributions can be tax-deductible, significantly reducing your taxable income.

Real-World Example: Freelance Designer with a Side Business

Let’s say you’re a freelance graphic designer earning $60,000 annually from your business.

With a Solo 401(k), you could:

• Contribute $23,000 as the employee

• Contribute 25% of net earnings ($15,000) as the employer

• Total contribution: $38,000

That means you could potentially deduct $38,000 from your taxable income. That’s a huge tax break - and a powerful step toward financial independence.

“You work hard for your money, your tax plan should work just as hard for you.”

Garrett Clark

Director of Sales

Key Tax Benefits of a Solo 401(k)

Contributions to a traditional Solo 401(k) reduce your taxable income in the year you make them. This can result in thousands of dollars in tax savings each year.

Your investments grow tax-deferred, meaning you don’t pay taxes on capital gains or dividends until you withdraw the funds in retirement.

Some Solo 401(k) plans allow Roth contributions, which are made after tax but grow tax-free and can be withdrawn tax-free in retirement.

If you're 50 or older, you can contribute an additional $7,500, giving you more flexibility to supercharge your savings.

While Solo 401(k) contributions don’t reduce self-employment tax directly, they reduce your net income, which indirectly lowers the amount subject to SE tax.

Why It Matters for First Responders with Side Income

First responders often rely on pensions or department-sponsored retirement plans. But many also have side businesses, second jobs, or consulting income, and that opens up an opportunity to supplement their future with a Solo 401(k).

If you're a firefighter who runs a lawn care business, a police officer who consults part-time, or an EMT with a weekend side hustle, you qualify. The income from those side gigs is self-employment income and can be used to contribute to a Solo 401(k).

You get to save more, reduce your taxable income, and plan beyond the pension. For many first responders, this is an underused but extremely effective wealth-building tool.

Additional Advantages for All Self-Employed Individuals

• Control: You decide how much to contribute and when.

• Flexibility: You can adjust contributions based on your income each year.

• Loan Feature: Many Solo 401(k)s allow you to borrow up to $50,000 or 50% of your balance.

• Investment Options: Self-directed Solo 401(k)s can include real estate, precious metals, private equity, and more.

Tax Planning Tips

Front-loading your contributions can maximize compounding growth and reduce taxable income sooner.

If you expect to be in a higher tax bracket later, Roth contributions might make more sense. If you're trying to lower taxes now, go traditional.

Keep detailed records of your business expenses to maximize deductions. Software tools or a simple spreadsheet can help.

If you have a 401(k) or pension through an employer, the Solo 401(k) is still available for self-employment income. Make sure you're not over-contributing across all plans.

Anyone with multiple income streams should work with a professional to optimize their tax situation. A CPA familiar with retirement accounts and self-employment income is ideal.

To get the tax benefits for a given year:

• The Solo 401(k) must be established by December 31st

• Contributions can be made up until your tax-filing deadline (including extensions)

Don’t wait until the last minute - setting up your plan early ensures you're positioned to make the most of your tax strategy.

Build a Future Worth Working For

Whether you're building your business full-time or bringing in extra income on the side, the Solo 401(k) is one of the best tools for saving money on taxes and preparing for retirement. For first responders, freelancers, consultants, gig workers, and entrepreneurs alike, it's a financial strategy that pays off now and later.

Start today. Take control of your income, your taxes, and your future.

Need help getting started? Visit Survival401k.com to learn more about how Solo 401(k)s can work for self-employed professionals and first responders like you.

This content is for educational purposes only and is not legal or tax advice. Please consult a qualified professional before making any financial or investment decisions.

Key Tax Benefits of a Solo 401(k)

Contributions to a traditional Solo 401(k) reduce your taxable income in the year you make them. This can result in thousands of dollars in tax savings each year.

Your investments grow tax-deferred, meaning you don’t pay taxes on capital gains or dividends until you withdraw the funds in retirement.

Some Solo 401(k) plans allow Roth contributions, which are made after tax but grow tax-free and can be withdrawn tax-free in retirement.

If you're 50 or older, you can contribute an additional $7,500, giving you more flexibility to supercharge your savings.

While Solo 401(k) contributions don’t reduce self-employment tax directly, they reduce your net income, which indirectly lowers the amount subject to SE tax.

Why It Matters for First Responders with Side Income

First responders often rely on pensions or department-sponsored retirement plans. But many also have side businesses, second jobs, or consulting income, and that opens up an opportunity to supplement their future with a Solo 401(k).

If you're a firefighter who runs a lawn care business, a police officer who consults part-time, or an EMT with a weekend side hustle, you qualify. The income from those side gigs is self-employment income and can be used to contribute to a Solo 401(k).

You get to save more, reduce your taxable income, and plan beyond the pension. For many first responders, this is an underused but extremely effective wealth-building tool.

Additional Advantages for All Self-Employed Individuals

• Control: You decide how much to contribute and when.

• Flexibility: You can adjust contributions based on your income each year.

• Loan Feature: Many Solo 401(k)s allow you to borrow up to $50,000 or 50% of your balance.

• Investment Options: Self-directed Solo 401(k)s can include real estate, precious metals, private equity, and more.

Tax Planning Tips

Front-loading your contributions can maximize compounding growth and reduce taxable income sooner.

If you expect to be in a higher tax bracket later, Roth contributions might make more sense. If you're trying to lower taxes now, go traditional.

Keep detailed records of your business expenses to maximize deductions. Software tools or a simple spreadsheet can help.

If you have a 401(k) or pension through an employer, the Solo 401(k) is still available for self-employment income. Make sure you're not over-contributing across all plans.

Anyone with multiple income streams should work with a professional to optimize their tax situation. A CPA familiar with retirement accounts and self-employment income is ideal.

To get the tax benefits for a given year:

• The Solo 401(k) must be established by December 31st

• Contributions can be made up until your tax-filing deadline (including extensions)

Don’t wait until the last minute - setting up your plan early ensures you're positioned to make the most of your tax strategy.

Build a Future Worth Working For

Whether you're building your business full-time or bringing in extra income on the side, the Solo 401(k) is one of the best tools for saving money on taxes and preparing for retirement. For first responders, freelancers, consultants, gig workers, and entrepreneurs alike, it's a financial strategy that pays off now and later.

Start today. Take control of your income, your taxes, and your future.

Need help getting started? Visit Survival401k.com to learn more about how Solo 401(k)s can work for self-employed professionals and first responders like you.

This content is for educational purposes only and is not legal or tax advice. Please consult a qualified professional before making any financial or investment decisions.