NJ allows taxpayers with schedule C income to reduce their taxable schedule C income by 401K contributions. I am trying to find out if they mean only the employee deferral limit of 19500 plus 6500 catchup or if it means 100% of 401k allowed on the federal 1040?Subtract qualified contributions to a self-employed 401(k) plan. Contributions to a plan in excess of the Federal limits, which are not an allowable deduction for Federal tax purposes, are also not deductible for New Jersey purposes.

Level 4

Question

NJ 1040 Schedule C 401k deduction, include employer side or just employee deferred amount?

Forum|Forum|4 years ago
April 10, 2022
4 replies
29 views

NJ allows taxpayers with schedule C income to reduce their taxable schedule C income by 401K contributions. I am trying to find out if they mean only the employee deferral limit of 19500 plus 6500 catchup or if it means 100% of 401k allowed on the federal 1040?

Subtract qualified contributions to a self-employed 401(k) plan. Contributions to a plan in excess of the Federal limits, which are not an allowable deduction for Federal tax purposes, are also not deductible for New Jersey purposes.

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Accountant-Man

Level 13

It does allow all of the deferral portion only, making it the same as a W2 with the 401k deferral.

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Nancy9Author

Level 4

The reason this doesn't make sense to me is that a company gets to deduct the 401k employer contribution from the corp taxes. By letting the schedule c taxpayer deduct it on the personal return it would make it comparable to the employee scenario.....

qbteachmt

Level 15

From Fed Sched C Line 19 instructions: “Enter your deduction for the contributions you made for the benefit of your employees to a pension, profit-sharing, or annuity plan (including SEP, SIMPLE, and SARSEP plans described in Pub. 560). If the plan included you as a self-employed person, enter the contributions made as an employer on your behalf on Schedule 1 (Form 1040), line 16, not on Schedule C.”

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Nancy9Author

Level 4

Thank you but my problem is not with the federal return. It is with the NJ 1040 where the adjustment for 401k is deducted directly from the schedule C income.

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