It's bonus season at work and they recently included the following in an email about the bonuses: "Bonus checks are taxed at a higher rate - around 30% in most cases! Since the traditional 401(k) and HSA Savings accounts are pretax contributions, think about adding more from this bonus check to lower your taxable income."
Let's assume my effective federal tax liability is 25%, and what my company has said above is true and the bonus is taxed at 30%. Does that mean there would be a difference in how much I pay in taxes in the two following scenarios:
A.) I receive the bonus as a post-tax deposit to my bank account. I then contribute $1000 into my 401(k) and then note that contribution the next time I do my taxes to reduce my total taxable income.
B.) I have my employer directly contribute $1000 into my 401(k) from that bonus.
If I'm understanding this correctly, in scenario A I'll pay 30% tax on that money and then be rebated 25% at tax time. In scenario B, I'm simply not paying the 30% at all.
Submitted March 04, 2017 at 12:39PM by elmuchoprez http://ift.tt/2lIBrXq
