I have rental properties that generate cash flow, can I set up a defined benefit plan with the rentals?

No. The reason is that rental properties generate passive income. This income is not subject to employment taxes (Social Security and Medicare). So in the eyes of the IRS you are not truly self employed. You must be self-employed (or have a W2 from your business) in order to qualify for defined benefit plan.

However, we have seen certain structures where rental properties have been structured with a management company. This management company can possibly pay you a wage to work for the business. If you have questions about how to structure a plan with rentals, make sure that you discuss it with us and your accountant.