401(k), IRA, SEP or Solo 401(k): Plan to Lower Taxable Income

Saving for retirement can also be part of your tax plan. Contributions to a 401(k), IRA or SEP can lower taxable income, while self-employed workers may have additional opportunities through a SEP or Solo 401(k). The right approach depends on your work situation, available plans and household budget. Before moving money, review your options and gather your records. A Ghion tax professional can confirm which contributions may reduce your taxable income and explain the limits and timing that apply to you.

Start with Your Workplace 401(k) and IRA Options

If you have a workplace 401(k), start by reviewing your contributions and the plan information available through your employer. Retirement contributions can lower taxable income, but the tax treatment of your contributions matters. Before making a change, ask a Ghion tax professional to confirm how your workplace options fit your situation.

An IRA is another option to explore. Rather than assuming every IRA contribution will reduce your taxable income, have Ghion review your eligibility and the applicable rules. The goal is to understand what a contribution could mean for your taxes before you commit money.

• Gather recent pay statements and your workplace retirement plan information.
• Locate statements for any IRA accounts you already hold.
• Ask Ghion to confirm contribution limits and whether your planned contributions qualify to lower taxable income.

Together, these records give you a useful starting point for comparing your options without relying on assumptions about deductions.

Self-Employed? Compare a SEP and Solo 401(k)

If you work for yourself, a SEP or Solo 401(k) may give you more room to set aside retirement money than an IRA. That makes these options worth exploring when you want to build retirement savings while lowering taxable income. The right choice depends on your business circumstances, not just which plan sounds more generous.

Before choosing, gather a clear picture of your business and discuss these questions with a Ghion tax professional:

• Which plan fits my business and staffing situation?
• How much can I contribute based on my income and any other retirement contributions?
• What setup, recordkeeping and ongoing responsibilities would each option involve?

A SEP and Solo 401(k) are not interchangeable, so avoid assuming the same requirements apply to both. Ghion can confirm the eligibility rules, contribution limits and timing for your situation, then help you compare the options before you open or fund a plan.

Match Retirement Contributions to Your Cash Flow

A retirement contribution should fit your budget, not leave you scrambling to cover everyday expenses. Before deciding what to contribute, look at the money coming in, essential bills and expenses you expect soon. The goal is to support retirement while keeping enough cash available for current needs.

If you run a business or your income varies, use your bookkeeping records to understand what is available after business costs. A strong sales month may not reflect what you can comfortably contribute throughout the year.

• Review household expenses and, if applicable, business operating costs before setting money aside.
• Keep upcoming tax payments and other planned expenses in your cash-flow picture.
• Revisit your contribution plan when income or expenses change.

Retirement contributions can lower taxable income, but the amount and timing should work for your situation. A Ghion tax professional can confirm the applicable rules and help you evaluate a contribution amount alongside your cash needs.

Gather Records and Confirm Limits Before Contributing

Before making a retirement contribution, gather the records that show what you have already contributed and how much income you expect. A clear picture helps you avoid choosing an amount based on guesswork or overlooking contributions made through another account.

• Recent pay statements showing workplace retirement contributions.
• IRA, SEP or Solo 401(k) account statements and contribution confirmations.
• For business owners, bookkeeping records showing business income and expenses.
• Your prior tax return and notes about changes in employment or household income.

Contribution limits, eligibility rules, deadlines and the tax treatment of a contribution need to be checked for your situation. A Ghion tax professional can confirm those specifics, including how contributions to different accounts may affect your options and which tax year a payment belongs to.

Keep the confirmation after you contribute, along with your supporting records. That gives you and your tax preparer a clearer trail when it is time to prepare your return.

How Ghion can help

Ghion Financial can help you compare retirement contribution options, confirm the limits that apply to you, and understand how contributions may affect your taxable income. We serve individuals and small-business owners in every US state, as well as Americans abroad. Book an appointment at www.ghionfinancial.com or securely upload your documents through our Client upload portal to get started.