My wife started making regular deposits in a 401k plan offered by her new employer in 2006.
Question: Is the money she invested in the 401k Plan tax deductible in 2006? In other words, do these contributions count as taxable income....or are they tax exempt?
If contributions to 401k plans are tax deductible, is there a limit to what we can claim on our federal income tax form each year if we file a joint return?
2007-01-01 07:24:07 · 10 answers · asked by Im2hard2please 2 in Business & Finance ➔ Taxes ➔ United States
The money in my 401k is tax exempt until I get it out. I think they will take about 15% when you get it and if you aren't a certain age they take another 10% at income tax time. I'm not great on these things so I hope someone can help you more.
2007-01-01 07:34:45 · answer #1 · answered by Pearl 6 · 0⤊ 1⤋
Any contribution made from income earned in 2006 to a 401k is deductible, up to the limit of $15,000 per individual per year (over 50? you get a catch-up contribution of $5000). Regular 401ks are not tax exempt, you have to pay taxes on earnings and contributions when you take it out.
Also, you may want to look into placing some of the money into the Roth Portion of 401ks (after tax money so no deduction today, but no taxes on earnings when you withdraw).
2007-01-01 07:35:24 · answer #2 · answered by GoodTimesMakingMoney 2 · 0⤊ 0⤋
Is already deferred automatically - should be on your pay stubs. You don't have to do anything. The more you put in, the more you can defer the taxes. IRAs are like savings accounts and they are after tax. Either scenario - you do nothing on your tax form. Is already deducted on your W-2 (end of year statement) which you attach a copy of to your completed tax form. For future, do know that early withdrawal (cannot do unless you have a certain amount invested; can make a loan but not advisable) has a 10% penalty (only waived after age 59 &1/2 ) + 20% tax and you then have to declare that as income on your tax form. Joint return is usually the best option for filing, over individual.
2007-01-06 11:00:59 · answer #3 · answered by Quest 6 · 0⤊ 0⤋
Your wife's 401k contributions were made before taxes.
There will be no deduction you take from taxable wages since the contribution has already been subtracted by the employer.
These contributions are not tax exempt. When the money is withdrawn, taxes will be due. They are tax deferred.
There are limits to 401k contributions but they are handled by the employer and are not a consideration when you do your taxes. Limits to a 401k plan are not affected by filing status or marital status.
Your wife can consult her HR department to see if an an increase in contributions is allowed.
2007-01-01 07:44:26 · answer #4 · answered by ninasgramma 7 · 2⤊ 0⤋
Money invested into a 401K plan is not taxed by the Government and your employer does not withhold any taxes on it when it is put into the account. When you withdraw from the plan, it is considered income and therefore, you pay taxes on it. There are great penalties for early withdrawal, so make sure you understand the particular ins and outs before taking money out. 401 K plans are primarily for retirement and there are sometimes other reasons to withdraw, but seldom without penalties.
2007-01-07 13:50:22 · answer #5 · answered by Jan C 7 · 0⤊ 1⤋
All Political Groups generally don't pay taxes, for one thing, there is no profit! Everything is supposed to be paid out. I believe its the Federal Election Board that requires political groups to file financial papers to see that pay outs are proper. However, they have to disclose donors who give over a certain amount. By filing with the IRS as a Section 501c(4) tax exemption organization, they still don't pay any taxes, but can keep their donor's list private. It is a very murky area.
2016-03-29 03:24:47 · answer #6 · answered by Anonymous · 0⤊ 0⤋
Yes and Yes. Yes they are tax exempt but there is a limit to how tax exempt they are - I can't say the exact percentage you will have to check with your local tax adviser.
2007-01-08 08:29:56 · answer #7 · answered by weemspena 1 · 0⤊ 0⤋
tax deferred is what they are. her employer will automatically remove the contributions from her wages when computing her withholding. When she starts taking the money out, they are subject to tax and/or penalties.
2007-01-07 17:16:17 · answer #8 · answered by Scott K 7 · 0⤊ 0⤋
It is not tax exempt. Tax exempt means that you never pay taxes on it. It is tax deferred, which means you don't pay taxes on the money now, but you wil pay taxes on it later.
2007-01-01 08:28:01 · answer #9 · answered by jseah114 6 · 3⤊ 0⤋
Hey, AIN'T THAT THE REASON FOR A KO1 PLAN
DAAH???
2007-01-07 01:06:04 · answer #10 · answered by peachiepie 7 · 0⤊ 1⤋