Can one contribute their max annual limit to their 401K in 2023 to defer capital gain liability from the sale of an investment property in 2023? Reducing tax liability?

401(k) contributions are pre-tax. What are you trying to accomplish?

@dmertz 

There is no deferral of a capital gain.  Deferring more of your compensation to a traditional 401(k) simply reduces taxable income.  That doesn't change how much of a capital gain is includible in income, but a reduction in taxable income it could reduce the tax rate that applies to your capital gain if the capital gain is long-term.

It's a bit late in the year to alter your deferral to a 401(k) unless you are self-employed and elect a one-time 401(k) deferral.  Unless 2023 would be the first year for a solo 401(k), the deadline to make the deferral election is year-end 2023.

Thank you for the reply! This is helpful. In this specific scenario, I have not made any contributions to my 401k this year. With the sale of the investment property, I have a capital gain tax liability of about $400k. If I contribute the max annual contribution to my 401k ($30k, I am well above 50 years old) for 2023, will I be deferring/reducing the capital gain tax liability from the sale of the investment property? Ex. $400k from sales proceeds - $30k contribution to 401k = $370k capital gain tax liability for 2023. Hope my question makes sense and thank you in advance.

Sorry, I just read the beginning half of your response. I see you said, contributing to the 401k does not reduce the capital gain liability. But it may place someone in a lower tax bracket. Thank you for your insight here.