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system
how much total salary to allocate to defer $17,500 to 401(k)?
user
you're on the right track, and yes, that small difference is subject to income taxes. do you use a payroll service? i do the same thing and use my payroll software to tweak the salary until the paycheck is just a few dollars every month (we run payroll once a month), with the rest going to the 401(k) and payroll taxes. so we're rounding up just a bit just so there's an actual paycheck with a positive number, and a bit does get withheld for fed/state income tax.  also keep in mind you can make a company match. if your plan is a solo 401(k) with just you and your wife as the sole employees, consider the 25% match for both of you. the match is not subject to payroll taxes because it is a company expense. irs web page: http://www.irs.gov/retirement-plans/one-participant-401(k)-plans
assistant