Maximizing retirement contributions when you have both W2 and 1099 income - what's the best strategy?

You're definitely on the right track with your retirement strategy! Let me address your questions one by one: Your calculation for the solo 401k employer contribution is correct. The $69,000 total limit for 2025 applies across all 401k-type plans, but you can split it between employee and employer contributions. Since you've already maxed your employee contribution ($23,000) at your W2 job, you can contribute up to $46,000 as the employer portion from your 1099 income. The 403b employer match ($6,250) does NOT count toward your solo 401k contribution limit. Employer contributions to different plans don't cross-limit each other, which is great news for you. For optimization opportunities: Consider whether you might benefit from a Health Savings Account (HSA) if you have a qualifying high-deductible health plan. That's another $4,150 (for 2025) you could set aside tax-advantaged. Regarding backdoor Roth conversions: Just be aware of the pro-rata rule. If you have any existing pre-tax money in ANY traditional IRA accounts (including SEP or SIMPLE IRAs), you'll have to factor that in when converting. The conversion won't be fully tax-free if you have other traditional IRA balances.

I was in a similar situation last year trying to figure out all this retirement stuff with mixed income. I spent hours reading IRS publications and still wasn't 100% confident. Then I found this AI tax assistant at https://taxr.ai that actually walked me through all the retirement contribution limits with mixed W2/1099 income. It analyzed my specific situation and confirmed exactly what my limits were for solo 401k contributions while also having a regular job with a 401k. They explained the "employer hat" vs "employee hat" concept in a way that finally made sense. They even helped me understand how the backdoor Roth conversions would work with my existing IRAs. The best part was that I could upload my previous tax returns and W2s and it gave me personalized advice based on my actual numbers. Saved me from making a $12,000 contribution mistake!

I wanted to follow up about that taxr.ai tool. I decided to try it myself and wow, I'm genuinely impressed. It caught something neither my accountant nor I had considered with my solo 401k setup. Turns out I was calculating my maximum contribution incorrectly because I wasn't properly accounting for self-employment taxes in determining my "net earnings" base. The tool showed me exactly how to calculate the correct amount and explained the difference between W2 contribution limits and 1099 contribution calculations. It also flagged that I had a SEP-IRA from years ago that would trigger the pro-rata rule on my backdoor Roth conversion, which would have resulted in unexpected taxes. Saved me from a headache at tax time! I'm all for healthy skepticism (as you can see from my initial comment), but this was actually worth checking out. Definitely more comprehensive than the advice I was getting elsewhere.

For anyone dealing with the IRS about retirement contribution limits or trying to get specific guidance, I highly recommend using Claimyr (https://claimyr.com). I spent weeks trying to get through to the IRS to confirm some specific details about my situation with multiple retirement accounts and kept hitting dead ends. I was about ready to give up when I found Claimyr - they got me connected to an actual IRS agent in about 20 minutes instead of the hours I was spending on hold. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that I could indeed make both employer and employee contributions to my solo 401k despite also having a 403b through my teaching job, but with some important limitations I hadn't understood before. They also helped me sort out how to document everything properly for tax filing.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it myself since I was desperate to sort out my retirement contribution issue before tax season. I had been trying for literally 3 months to reach someone at the IRS about whether my solo 401k contributions were calculated correctly given my other retirement accounts. Using Claimyr, I got through to an IRS rep in about 35 minutes (on a Monday morning, no less). The agent walked me through exactly how the contribution limits work across multiple retirement accounts and confirmed I was right about the employer contribution portion not being affected by my other employer's match. He also sent me to a specific IRS publication that addressed my unique situation. I've never been so happy to be proven wrong. Just wanted to update here since my original comment was so dismissive. Sometimes things actually work!

Make sure you're being careful about the backdoor Roth conversion if you have ANY other traditional IRA accounts! The pro-rata rule will bite you if you're not careful. For example, if you have $50,000 in an existing traditional IRA and you put $7,000 into a new traditional IRA to convert to Roth, you don't just pay taxes on the $7,000. The IRS looks at ALL your traditional IRA money together, and you'll pay taxes proportionally. In this example, you'd have $57,000 total in traditional IRAs, and only 12.3% ($7,000/$57,000) of your conversion would be tax-free. The rest would be taxable! One solution: See if your solo 401k allows you to roll existing traditional IRA funds INTO the 401k before doing the backdoor Roth. That removes those funds from the pro-rata calculation.

Don't forget about the QBI deduction (Section 199A) for your 1099 income! With that level of contractor income, you should definitely be taking advantage of the 20% qualified business income deduction, which could be significant tax savings. Just be aware that retirement contributions from your 1099 business reduce your QBI, so you're making a tradeoff between retirement tax advantages and QBI deduction. Sometimes it makes sense to not max out retirement to keep a higher QBI deduction. At your income level, there are phase-out considerations too. Might be worth running the numbers both ways (max retirement vs partial retirement with higher QBI) to see which gives you better overall tax benefits. This is especially true if you're near any of the income thresholds where QBI starts to phase out.

This is a great comprehensive breakdown of your retirement strategy! I wanted to add one more consideration that might be relevant given your income levels - the timing of your solo 401k contributions throughout the year. Since you're making significant quarterly estimated tax payments on your 1099 income, you might want to consider making your solo 401k contributions quarterly as well rather than waiting until the end of the year. This can help reduce your estimated tax burden and improve cash flow. Also, with your combined income approaching $500k, you're definitely in territory where tax-loss harvesting in your taxable investment accounts could provide meaningful benefits alongside your retirement contributions. The tax savings from harvesting losses can be substantial at your marginal tax rate. One more thought - if your consulting business continues to grow, you might want to explore whether converting to an S-Corp election could provide additional tax savings on the self-employment tax portion, though this adds complexity and requires careful analysis of the tradeoffs. Really solid planning overall though! The combination of maxing traditional retirement accounts while doing backdoor Roth conversions gives you great tax diversification for the future.

Great question about quarterly contributions! You can absolutely make employer contributions to your solo 401k throughout the year - you don't have to wait until year-end. The key is making reasonable estimates based on your expected annual profit. If you end up contributing too much based on your actual final net self-employment earnings, you can always correct it before the tax filing deadline. Many solo 401k providers allow you to set up automatic monthly or quarterly contributions, which really helps with cash flow management and dollar-cost averaging into your investments. Regarding S-Corp election, the general rule of thumb is that it starts making sense when your net self-employment income is around $60,000-$80,000 or higher. At your $312,500 level, you could potentially save thousands in self-employment taxes. The basic idea is that you pay yourself a "reasonable salary" (subject to payroll taxes) and take the rest as distributions (not subject to SE tax). However, S-Corp election is a year-long commitment and adds complexity - you'll need payroll processing, quarterly payroll tax filings, and potentially more accounting costs. You'd also lose the ability to make solo 401k contributions based on 1099 income (since you'd now be a W2 employee of your own S-Corp), though you could potentially do a SEP-IRA or corporate 401k instead. Given your income level and the complexity of your situation, I'd definitely recommend running the numbers with a tax professional who can model the total tax impact across multiple years. The savings can be substantial, but the decision depends on your specific circumstances and long-term business plans.