Pre-tax retirement savings tax incentives
Pre-tax retirement contributions are excluded from gross income on Form W-2 (Box 1), saving federal income taxes at your highest marginal bracket (12%, 22%, 24%, 32%, 35%, 37%) plus state income taxes.
This tax deferral allows the full gross amount to compound in investments until distributions begin in retirement.
Worked example: US pre-tax contribution tax savings
An employee in the 24% federal tax bracket and 5% state tax bracket contributing $10,000 annually into a Traditional 401(k) saves $2,400 in federal taxes and $500 in state taxes. The total tax savings is $2,900, meaning a $10,000 retirement investment costs only $7,100 out-of-pocket.
Inputs for the us pension tax relief calculator
Contribution Amount
Enter your total annual pre-tax elective deferral.
Marginal Federal & State Brackets
Select your federal marginal tax bracket and enter your state income tax rate.
CALCULATOR QUESTIONS
US pension tax relief calculator questions
Are IRA contributions deductible if I have a 401(k) at work?
If covered by a retirement plan at work, deduction for Traditional IRA contributions phases out at higher income levels (modified AGI between $77,000 and $87,000 for single filers in 2024).