I set up a self-employed individual 401k and am confused about the limits on this.
I'm a sole proprietor with no other employer-provided 401k than this one I set up on my own. It seems I can make contributions as employee-elective, employer match, or profit sharing; yet they all end up in the same 401k from my money since I'm both the employer and employee in this situation.
Let's say I have 15k income and 5k business deductions, resulting in 10k net income. What does this mean for my allowed limits for each of the 3 types of contributions? Are all 3 types deductible?
- employee limit: 17.5k for 2014, unless net income lower
- employer limit: 25% of compensation (net income - 1/2 SE tax - contribution)
- employee+employer: not exceeding total of $52,000 for 2014
Still unsure of how to calculate maximum contribution for a net income of less than 17.5k
For instance with a 10k net income, 9293 is the limit for 401k from employee. How is this calculated? I believe this limit is total for all sources too, which I'm confused about.