Does my 401k affect my tax return

It Depends. . 401k contributions are made pre-tax. As such, they are not included in your taxable income. However, if a person takes distributions from their 401k, then by law that income has to be reported on their tax return in order to ensure that the correct amount of taxes will be paid.

If you withdraw money from your 401(k) before you’re 59½, the IRS usually assesses a 10% penalty when you file your tax return. That could mean giving the government another $1,000 of that …

The Tax Benefits of Your 401(k) Plan – TurboTax

Official Site: https://turbotax.intuit.com/tax-tips/investments-and-taxes/the-tax-benefits-of-your-401k-plan/L8QHCzbiO

When you contribute 6% of your salary into a tax-deferred 401 (k)— $2,100—your taxable income becomes $32,900. $35,000 x 0.06 = $2,100. $35,000 – $2,100 = $32,900. The income tax on $32,900 is $525 less than the tax on your full salary. So, not only do you get savings for retirement, you save on taxes today.

When you save in a traditional 401 (k) plan, you are saving pre-tax, meaning you don’t pay taxes on your savings until you withdraw them from your 401 (k). The money you save in the plan lowers your taxable income since your pre-tax contributions are deducted from your gross income before federal taxes are withheld.

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Explained: How to File Taxes After 401(k) Withdrawal Video Answer

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