Pretax Contribution


DEFINITION of 'Pretax Contribution'

Any contribution made to a designated pension plan, retirement account or other tax deferred investment vehicle where the contribution is made before federal and/or municipal taxes are deducted.

BREAKING DOWN 'Pretax Contribution'

In calculating a pretax contribution, the amount of taxes withheld will be reduced, as the basis for the taxable amount will be reduced. Making pretax contributions is beneficial to those who are eligible, as this will reduce the amount of taxes paid at that time. It is always better to defer payments due to the time value of money.

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  1. I am making after-tax contributions to an IRA. Will I get taxed again when I withdraw ...

    No. Withdrawals of your after-tax contributions to your IRAs should not be taxed. However, the only way to make sure this ... Read Full Answer >>
  2. I am self-employed and do not need most of my IRA RMD for expenses. Can I reinvest ...

    You can use your required minimum distributions (RMDs) to fund your Roth IRA as a Roth IRA contribution. This is because ... Read Full Answer >>
  3. How does a Roth IRA grow over time?

    Your Roth IRA account grows over time thanks to two funding sources: contributions and earnings. While your contributions ... Read Full Answer >>
  4. Can my 401(k) be seized or garnished?

    As long as your retirement funds are held in your 401(k) and you do not take them as distributions, your 401(k) cannot be ... Read Full Answer >>
  5. Can my IRA be taken in a lawsuit?

    Whether your IRA can be taken in a lawsuit depends largely on your state of residence and the judgment in question. There ... Read Full Answer >>
  6. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>

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