Max 401k, 33% bracket

3 Replies

Hey BP folk, I have been contemplating the tax ramifications of contributing to my 401k. Can anyone give me an idea about how much tax/take home I could expect by not contributing the $18,000 per year max if I am in the 33% tax bracket? Thanks M

@Marc M.
More info would be needed but there are many calculators out there to figure his

https://nb.fidelity.com/public/nb/401k/tools/calculators/takehomepay

Marc,

You have all the information there to calculate the answer at least from a Federal tax standpoint.  Your 401k contributions of $18,000 would be considered to be the last dollars earned or likely at the 33% tax bracket.  Although, it is possible in contributing the max you'd end up in a lower tax bracket.  Assuming you stay in the 33% tax bracket, your Federal tax owed would be $5,940 (33% of $18,000) resulting in a "net" of $12,060.  However, this doesn't account for any state and local taxes.  I looked up and found that Virginia taxes income at 5.75% above $17,000.  So, you'd have to pay $1,035 in state income tax on this money.  Your net income would then be $11,025 after Federal and State income taxes.

One other thing.  In not maxing out your 401k, it may potentially affect other deductions or credits you'd otherwise be entitled to by showing a lower adjusted gross income.  So, you may end up with less than $10,000 after it's all said and done.

-Jon

Thanks for the replies. I’m in Ohio and not VA. I’m not sure what differences there are or if it would be close. I figured I’d take Home $1000 of the $1540/mo. I would still be in the 33% bracket.