Mark Kohler shows small business owners how to use pre-tax 401(k) contributions for immediate tax deductions while letting money grow tax-deferred. If you've maxed out Roth IRAs and HSAs, you can contribute additional pre-tax dollars to an employer plan or set up a solo 401(k) or defined benefit plan to reduce taxable income now and pay taxes only in retirement.
Chapters
You're like, Mark, man, we hit the lottery this year. You had a good year in your business. Maybe you sold some real estate, exited a business, or your business is just really hitting another level. And congratulations. That's not— doesn't happen to everybody. But let's say that's happening. You've got your match, maybe through your spouse's day job, you got benefits, and now you're building up the Roth and you're building up the HSA. What next? Well, this is where using pre-tax contributions strategically could come into play. Now, what a pre-tax contribution is, you're going to put money into that 401, back at work. So you did the match, got out, did the tax-free accounts, you got extra money. You could go back there to the 401, put money in, and get a tax deduction to do so. You could actually even set up your own 401 inside your small business. You could do what's called a defined benefit plan, all sorts of options. And this is where you start trying to get a tax deduction to put the money away. And why I call it pre-tax is because you get a tax deduction, it grows tax-deferred, and then you'll be taxed when you pull it out later.
