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You can still claim a tax benefit from gifting commodities to a charity even if the value doesn’t exceed the standard deduction.

A Solo 401(k) also known as an individual 401(k) can be an excellent retirement plan for a small business owner who doesn’t have employees or who has employees that can be excluded from coverage. Some of the advantages of a Solo 401(k) plan include:

• Low administration fees;

• No annual IRS filing requirements;

• High annual contribution limits; and

• The choice of pre-tax (Traditional) or after-tax (Roth) contributions.

Certain employees can be excluded from participation in an individual 401(k). These include:

• Employees under age 21; and

• Employees who work less than 1,000 hours per year.

Although a Solo 401(k) plan is designed for an individual business owner, it is available to the spouse of the business owner and any shareholder or partner in the business, as well. This retirement plan must be established by the end of the business tax year in order to make a contribution for that year.

Setting up a Solo 401k is easy to do and is available to owners of a Sole Proprietorship, S Corporations, C Corporations, or partnerships. Unlike traditional 401(k)s, there are no complicated discrimination testing requirements or Form 5500 filings.

Contributions to a Solo 401(k) plan are comprised of two parts, employee deferrals and employer profit sharing contributions. The annual maximum employee salary deferral contribution is $19,500. Participants age 50 or older can contribute up to $26,000 annually. In addition to employee deferral contributions, a business can also make profit sharing contributions, increasing the total possible annual contribution to $57,000 for people under the age of 50 and $63,500 for those 50 and older.

A SEP IRA is another attractive retirement plan for the small business owners. Unlike the Solo 401(k), you have up until your tax filing deadline the following year to setup this plan. A Solo 401(k), however, may allow you to contribute more money.

When setting up a Solo 401(k) plan, there are some important decisions that you have to make. The most important decision is how to invest the contributions. Another is how much of the employee deferral to make pre-tax and how much to contribute post-tax (Roth). Consulting with a fee-only, Registered Investment Advisor is one of the best ways to make these decisions wisely. — Chris Nolt, WLJ correspondent

(Chris Nolt is the owner of Solid Rock Wealth Management, Inc. and works with families who are selling a farm or ranch and transitioning into retirement. For more information, call 800-517-1031 or visit: www.solidrockwealth.com.)

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