Freelancing and the Solo 401k: How I decreased my tax bill by $25k
<h2>Freelancing vs. Full-time Trade-offs</h2>
<p>Freelancers forgo a lot of employee benefits like medical, dental, gym perks, as well as employer-sponsored 401k plans, which offer over 3x higher contribution rates than traditional IRAs, limiting tax savings. For instance, full-time employees contributing $20,500 at a 40% tax rate can save around $8,200 in taxes yearly. Without a 401k, many freelancers just max out their Traditional IRA contribution, which is only $6k. But, that’s only because a lot of freelancers don’t know about the Solo 401k or Individual 401k! Yes, you can have all the benefits of a 401k as a freelancer, and more!</p>
<h2>The Solo 401k</h2>
<p>The Solo 401k or Individual 401k looks very much the same as a traditional 401k but is designed for a business owner, with no employees. Being a freelancer you don’t always think of yourself as running a business but in the eyes of the government, you are running a service business. By this interpretation, the majority of the <a href="https://www.zippia.com/advice/how-many-freelancers-in-the-us/" rel="noopener ugc nofollow" target="_blank">+70M freelancers</a> in the United States fit this definition, too. There are no age restrictions to opening a Solo 401k and all you need are an Employer Identification Number (EIN) and a provider, like e-trade, to set up the actual investment account.</p>
<p><a href="https://medium.com/@daniel.francoeur65/i-lowered-my-tax-bill-by-25k-as-a-freelancer-took-me-10-minutes-a5d6e449fd48"><strong>Learn More</strong></a></p>