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Author: Fletch52 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121258  
Subject: Re: Student loan interest deduction threshold Date: 3/11/2005 7:31 AM
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Effect of 401(k) on taxable income. Say you have an employee who earns $40,000 per year and contributes $4,000 to their 401(K). On their W-2 the box 1 earnings would be only $36,000 which is $40,000 - $4,000 (401(K)). Box 12 would have a D code and show a value of $4,000.

Even if you have too much income for the savers credit your 401(K) contributions are not taxable and basically save you the federal tax on those contributions. You will pay social security and medicaire taxes on the 401(K) contributions however.

Fletch52
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