Of course, investors would need to actually have independent contractor or sole proprietor income to invest in a solo 401(k) or the IRS could characterize the business as a hobby, says Knolle.
In order to qualify for a solo 401(k), a business can not have employees (other than a spouse), but can work with independent contractors, the IRS says.
While there was significant scuttlebutt over the weekend that 401(k) contributions would be capped, Trump already dismissed that notion Monday in a Tweet: “There will be NO change to your 401(k),” Trump said in a Twitter post. “This has always been a great and popular middle class tax break that works, and it stays!”
The Wall Street Journal and the New York Times reported on Friday that Republicans were considering an annual cap of about $2,400 on pre-tax contributions to 401(k) plans, roughly 13 percent of what workers under age 50 currently can contribute on a tax-deferred basis. That option appears to be off the table—for now.
The White House and congressional allies are floating a number of proposals to trim tax deductions in order to generate revenue lost as a result of their proposed tax cuts, the centerpiece of which is a sharp reduction in the corporate income tax rate.
That is because the Senate's version of the budget allows for tax reform to add only $1.5 trillion to the deficit over the next 10 years – potentially forcing lawmakers to make some difficult decisions about where and how much to trim the current tax code.
Lawmakers in the House and Senate are expected to finalize a 2018 budget in the coming days that will lay the groundwork for tax reform through reconciliation – which means they could pass tax cuts without the need for Democratic support.