Solo 401K pre-tax contributions, NJ tax treatment

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Solo 401K pre-tax contributions, NJ tax treatment

Post by nyckingo23 »

Though topic is sans software, we're using Turbotax 2021 to simulate 2022 tax situation.
Say Wife has around $65K net profit from her overall 1099 income (Sole Prop) and she also has some W-2 income from another company (where she maxed out her $20,500 contri for co. 401K as employee deferral). I have around $54K (as sole prop profit/ on 1099) on my end.

Based on my understanding of NJ rules- it allows pre-tax deduction of 401K contri (but not for other retirement plans)- and all contributions upto federal limits are deductible for NJ purposes (

For some odd reason my turbotax is not reducing NJ tax beyond what it does for the initial 20.5K employee deferrals, even though its showing max allowable as much more (taking employer profit sharing into a/c).

To add further- my 1099 income is from me supporting wife's 1099 project- so she'll issue a 1099 to me. My assumption was as soon as I put my income as an expense (contract labor) for her, reducing her net profit (Schd. C)- and creating income for me in my own Schd. C - total tax due shd. remain the same (since SE taxes would accrue regardless) - but surprisingly it shoots up at least on Fed/IRS side? This is before I add my own 401K contributions of course - could someone explain why wud it do that?

And if someone with NJ tax knowledge guide me to manual steps that I must follow to check where tax s/w is bungling up - and regardless of software, how can I verify how much can be contributed pre-tax to NJ and such that every $ contributed is reducing NJ taxes and upto Max allowed. My rough guess is it shd. be around 44K for my wife and upto 50K for me as I just qualified for catch-up contribution too (assuming that much income can be locked up by us)

Greatly appreciate any help!
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