What are the tax implications of contributing to a Solo 401(k)?

Contributions to a Solo 401(k) can have significant tax implications:

 

- Traditional Contributions: Made pre-tax, reducing your taxable income for the year.

- Roth Contributions: Made after-tax, allowing for tax-free withdrawals in retirement.

 

Withdrawals in retirement are taxed based on the type of contribution. Early withdrawals (before age 59½) may incur penalties unless specific conditions are met.