After-Tax Contribution

Definition of 'After-Tax Contribution'


A contribution made to any designated retirement or any other account after taxes has been deducted from an individual's or companies taxable income. After-tax contributions can be made on a tax deferral, and on a non tax deferral basis, pending on the type of account the entity is making contributions to.

Investopedia explains 'After-Tax Contribution'


Contributions made to any form of retirement or investment account on an after-tax basis is the common form of contributions. Most investors prefer the thought of not paying taxes on the principal when they make a withdrawal from the investment. After-tax contributions would be beneficial if tax rates are expected to be higher in the future.

Contributions made to a tax deferral account require the individual to claim these contributions on their income tax filing each year, which entitles the tax payer to a refund based on their contributions at the going tax rate.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option is purchased and the lower premium option is sold - both at the same time. The higher the debit spread, the greater the initial cash outflow the investor will incur on the transaction.
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious debt when government leaders use borrowed funds in ways that don't benefit or even oppress citizens. Some legal scholars argue that successor governments should not be held accountable for odious debt incurred by earlier regimes, but there is no consensus on how odious debt should actually be treated.
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by additional investment would not warrant the expense. A harvest strategy is employed when a line of business is considered to be a cash cow, meaning that the brand is mature and is unlikely to grow if more investment is added.
Trading Center