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HomeRecruitment GuideGlossary Terms A-ZPre-tax contributions
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Pre-tax contributions

Pre-tax contributions are those made to an assigned retirement account, pension plan, or another type of tax-deferred investment account in which employees make contributions before federal and state taxes deductions, such as investing in a 401(k) plan. The main tax advantage for employees is contributing to the retirement plan with money that hasn’t been assessed with payroll taxes, allowing them to reduce their tax burden. Pre-tax contributions facilitate postponing paying taxes on the contribution amount and earnings as long as the funds remain in the account. When funds are withdrawn at retirement, taxes will be assessed but often at a lower rate.

Related Terms

  • Tax-deferred contributions
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    The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.

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