Will I get any kind of break? This is my first time filing with a 401k amount on my W-2. I'm Single, no dependents and I make about $30,000/year.
2007-01-26 12:10:43 · 5 answers · asked by pulchritudinous 6 in Business & Finance ➔ Taxes ➔ United States
When you get your W-2, you will see your taxable wages in Box 1. Compare this with the Social Security Wages in Box 3. The difference between those two boxes includes your 401k contribution, which appears in Box 12, with Code D.
You document your contribution to your 401k by entering all your W-2 information into your tax software. If you do a manual return, you just use Box 1 for wages, it already has the 401k contribution subtracted. No separate entry for your 401k contributions appears in the tax return.
You pay no current income tax on the amount in Box 12. All earnings from your contributions are also tax-deferred until you withdraw them at retirement.
In addition, if your Box 1 income is below certain limits, you may get a Savers Credit on contributions to your 401k. You appear to be above the threshold ($25,000), unless you have deferred enough to get below $25,000.
So, many tax benefits.
2007-01-26 16:58:21 · answer #1 · answered by ninasgramma 7 · 0⤊ 0⤋
Like tonal said, you won't have to deduct the 401(k) contributions on your tax return because they're not included in your wages on your W-2. Your employer will have already done the deducting for you. Just enter the amount of wages shown on your W-2 on your tax return and that's it.
2007-01-26 20:41:31 · answer #2 · answered by figment_usa 5 · 0⤊ 0⤋
You don't show it on your taxes. You get the tax break automatically, since the amount you contributed isn't included as taxable income on your W-2.
2007-01-26 20:38:41 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
These deferred wages (commonly referred to as elective deferrals) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 since they were not included in the taxable wages on your Form W-2. However, they are included as wages subject to social security, Medicare, and federal unemployment taxes.
More info:
http://www.irs.gov/taxtopics/tc424.html
2007-01-26 20:20:12 · answer #4 · answered by Anonymous · 1⤊ 0⤋
Make sure and see if you qualify for the Saver's Credit....
2007-01-26 20:22:16 · answer #5 · answered by Anonymous · 0⤊ 0⤋