Why would the contribution only increase my refund by 9.6% if my non self employment income is based on my federal tax rate of 22%? Im only seeing 960 increase for every 10k contribution.
https://turbotax.intuit.com/tax-tips/investments-and-taxes/the-tax-benefits-of-your-401k-plan/L8QHCz...
With tax-deferred 401(k) plans, workers set aside part of their pay before federal and state income taxes are withheld. These plans save you taxes today. Money pulled from your take-home pay and put into a 401(k) lowers your taxable income so you pay less income tax now.
For example, let's assume your salary is $35,000 and your tax bracket is 25%.
- When you contribute 6% of your salary into a tax-deferred 401(k)— $2,100—your taxable income is reduced to $32,900.
- $35,000 x 0.06 = $2,100
- $35,000 - $2,100 = $32,900
- The income tax on $32,900 is $525 less than the tax on your full salary of $35,000. So, not only do you get savings for retirement, you save on taxes today.
