Qualify for tax breaks
Did you know that you can defer income tax as much as $22,500 from what you save on a 401(k) plan in 2023? A worker in the 24% tax bracket who is able to save this amount might reduce their tax bill by $5,400. Income tax won’t be due with this amount of money until it’s withdrawn from the account.
Workers who earn less than $36,500 in 2023 ($73,000 for couples) will be able to qualify additionally for the saver’s credit, which is usually worth between 10% and 50% of 401(k) contributions up to $2,000 for individual and $4,000 for couples. However, the biggest saver’s credits usually go to workers with the lowest incomes.
