Before-tax contributions

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Before-tax contributions

The portion of an employee's salary contributed to a retirement plan before federal income taxes are deducted; this reduces the individual's gross income for federal tax purposes.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Before-Tax Contributions

Contributions made to a retirement plan with taxable withdrawals. That is, when one makes before-tax contributions to a retirement plan, one does not pay taxes on the contributions in the year they are made, but defers taxation until one begins to make withdrawals from the plan. One makes before-tax contributions to traditional IRAs and most 401(k)s. See also: After-tax contributions.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
People who say they've maxed out in their 401(k) might mean they've hit the annual IRS limit allowed for pre-tax contributions. For 2019, the max for employees who participate in a 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is $19,000.
(That's after taking the standard deduction and deducting pre-tax contributions to retirement plans.) The Fords expect to have similar income in 2019.
Making an after-tax contribution to a traditional IRA that's already funded with pre-tax contributions will result in a pro-rata tax bill on the pre-tax assets subject to conversion.
During the Tuesday briefing, Schumer said the Senate Democratic plan would lift the cap on pre-tax contributions for 401(k)s, create a new tax credit for companies who will match 401(k) contributions, and create a new auto-IRA program "for the one half of American workers under age 65" who don't have access to an employer-sponsored retirement plan.
Some plans allow for pre-tax contributions, Roth contributions and post-tax contributions or a combination of these, and some plans allow for in-plan conversion of funds between the accounts.
A: "With pre-tax contributions, participants will forgo paying taxes on the money they contribute to the plan," Lucas says.
These clients should ensure that they are taking all steps possible to reduce AGI -- such as maxing out pre-tax contributions to retirement accounts, health savings vehicles and dependent care programs.
And the limit on pre-tax contributions to flexible spending accounts are now capped at $2,500 annually.
* It ensures that highly-compensated employees can maximize their pre-tax contributions to the plan; and
Adding a cash balance plan allows them to rapidly accelerate savings with pre-tax contributions as high as $100,000 to $220,000, depending on their age.
But a new twist on IRAs allows employers to establish what are known as payroll-deduction IRAs, which give their employees the option (and the opportunity) to fund their own IRA with pre-tax contributions. This is no different from an employee establishing his or her own IRA; the employee is still in complete control of the amount of contributions, investments, and distributions.
Also, participants in 401(k), 403(b) and 457 plans can roll over account balances to a Roth, subject to tax on pre-tax contributions and earnings.