Taxes on retirement contributions

In general, depending on the account you choose you may be able to make pre-tax contributions (meaning you pay no taxes on contributions and pay only when you withdraw the money), or you may be able make after-tax contributions (meaning you’ll get to make withdrawals without paying taxes on them).

Pre-tax contributions

Making pre-tax contributions to your retirement account could benefit you by giving you a lower overall tax liability when you file your taxes each year. To explain what that means, here is an example. If a single filer earns $50,000 gross pay annually, that puts them in the 22% tax bracket¹. With a rate of 22%, they’ll pay approximately $11,000 in federal taxes. However, if they have a gross pay of $50,000 and contributed $10,000 to a 401(k) plan that year, their total tax liability would now be about $40,000. At a rate of 22% they would end up paying only about $8,800 when their annual taxes are due.

These are the types of retirement accounts which take pre-tax contributions:

• Traditional 401(k)
• Traditional IRA
• 403(b)
• 457(b)

After-tax contributions

After-tax contributions exist for “Roth” accounts. Roth accounts get their name from Delaware Senator William V. Roth Jr.² who helped introduce Roth IRAs through part of the Taxpayer Relief Act of 1997.³ Senator Roth was a well-known advocate for tax cuts that would encourage economic growth. Roth 401(k)s were first introduced in 2001.⁴ Now, there are also Roth versions of 403(b) and 457(b) accounts.⁵

These could be beneficial to someone whose retirement income level pushes them into a higher tax bracket, requiring them to pay more taxes in retirement than they did when they were employed. The more money you have saved, the larger your required minimum distributions will be and the more income tax you may have to pay on those distributions. If you currently have a pre-tax retirement account, there may be options to switch it or have it “rollover” to a Roth account. Be aware that you will need to pay taxes on the funds that rollover during that year.

Taxes on retirement withdrawals

As noted above, withdrawals from pre-tax accounts do have tax consequences. These withdrawals are taxed at the rate corresponding to which tax bracket you fall under. Check out these helpful links from the IRS which explain how distributions from each account work. You can also find help with calculating what you might owe at irs.gov.

Withdrawals from Roth accounts are not taxable under certain circumstances. Other forms of retirement income that can be taxed are:

Pensions, Annuities, & Social Security

Pensions and annuity payments may be taxed by the IRS at your regular rate. However, certain types of pensions such as military or disability pensions may be entirely tax-free. A portion of Social Security benefits may be subject to income tax, depending on your total income. State income taxes on pensions, annuities, and social security will vary. When you’re thinking about which state to retire in, this is an important factor to consider.⁶

In Massachusetts, Social Security income is exempt from your gross income, meaning your payments will not be taxed. Most private pensions and annuity plans are taxable but many government pensions are exempt.⁷

Remember, everyone’s retirement journey is unique, so personalized advice is essential. Consult a financial advisor to create a tax-efficient retirement plan tailored to your goals and circumstances.

Open a Traditional or Roth IRA certificate

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Disclaimer: This content is intended to provide general information and shouldn’t be considered legal, tax, or financial advice. It’s always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your individual financial situation.

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Research the charity’s mission

First and foremost you must make sure the mission of the charity you are giving to is one that you can stand behind. A clear mission statement tells you what the organization intends to accomplish, and what causes they support. If it resonates with your personal values and priorities, you’re off to a good start. A well-established charity or non-profit will have a website which outlines their goals and ways you can help.

Check the charity’s financial health

Reputable charities provide detailed financial information on their websites so you can see exactly where your money is going after you give your donation. Look for organizations that allocate a significant portion of their funds directly to programs and services.

Websites like and offer ratings and in-depth reports on various charities. You can also search the public charities filing database for the Attorney General’s Office of Massachusetts . They oversee more than 25,000 charities in the state ensuring they follow proper regulations and provide transparency to the public.

Evaluate the charity’s impact

A good charity can quantify its achievements and demonstrate how donations are used effectively. Review the charity’s annual reports to assess its progress and impact. Check its website as well as any social media pages to find other organizations they may be involved with.

It’s also a good sign to see that a charity has an online presence. Having many followers who like and comment on social media posts tells you they have trust within the community. Read online reviews and search for news reports about the organization. You may be surprised by what you find in the press.

Beware of Scams and Misleading Tactics

Unfortunately, there are scammers who will exploit your kindness and empathy. And charities with shady practices that may choose to line their pockets with your donations instead of investing into programs that help their cause. Properly vetting the charity can ensure that not only are they legitimate, but their donations are going toward something meaningful.

• Verify the charity’s registration: Ensure the charity is registered with the appropriate government agencies. Gifts to a non-qualified charity are NOT tax deductible.
• Avoid high-pressure tactics: Legitimate charities won’t pressure you into donating immediately. A sense of urgency could be a red flag that you are facing a scammer. DO NOT click a link in an email or text you weren’t expecting that is pressuring you to give. Phishing is the number one cybercrime.
• Be wary of emotional appeals: While emotional appeals can be effective, be cautious of organizations that rely solely on emotional manipulation.

You can file complaints about charities or non-profits on if you believe they are behaving unethically or misappropriating funds.

Consider a Donor-Advised Fund

A donor-advised fund (DAF) is like an investment account specifically for donating funds to charities you care about. How it works: you make contributions that are immediately tax-deductible. While the funds are in the account and you’re deciding which charities to support, your money can grow so you can give even more.

These accounts are managed by professionals who will disperse your funds to charities you choose when you advise them to. It’s a good option to grow your giving power over time for larger grants that make more of an impact. And, the flexibility gives you more time to properly research charities first.

By using this guide, you can feel confident in making charitable donations that align with your values and make a positive impact on the world. Remember, to watch out for red flags that could indicate a scam like a sense of urgency, lack of online presence or professionalism, and manipulative emotional appeal.

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Disclaimer: 91şÚÁĎÍř First was not paid to endorse or evaluate the companies or services mentioned in this post. These links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by 91şÚÁĎÍř of any of the products, services or opinions of the corporation or organization or individual. 91şÚÁĎÍř bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. Contact the external site for answers to questions regarding its content.

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Tax Deductions for Small Businesses

Some of the top itemized deductions for small businesses are:

1. Business Meals

Meals related to your business such as sales or client lunches can be deducted. Just keep your receipt and take note of who you met with and what you were meeting about, so you can itemize it later.

2. Office Supplies

Any office supplies including but not limited to; computers, printers, scanners, paper, pens, phones, desks, or chairs; can be itemized with your deductions. Again, make sure to save your receipts!

3. Travel Expenses

Business-related travel expenses can be written off as long as the expense is considered necessary for your business. These expenses can include mileage, airfare, rental cars, hotel stays, meals, etc.

4. Phone and Internet Expenses

Your phone service and internet costs can be deducted if it is essential to running your business.

5. Legal & Professional Service

If you pay a lawyer or accounting professional to help you run your business, you can write that off. Use to help you determine what is considered professional service.

6. Software Fees

Any computer software considered essential to running your business can be deducted. This could be accounting software, reporting software, email software, etc.

7. Salaries & Benefits

Small business owners with employees can write off salaries, benefits, bonuses, and even vacation pay for their employees. Your business must meet certain requirements to do this. Those are: the employee is not a sole proprietor, LLC member, or partner of the business, the salary is reasonable and necessary, and the services delegated to the employee were provided.

8. Home Office Expenses

To qualify for a home office expense deduction, your office must be used exclusively for work. You can’t claim your living room if you work with a laptop on your couch. Further, you must be self-employed using the space regularly for your primary location of conducting business. Working remotely for a larger company won’t count. The for this deduction state you can claim five dollars per square foot of home office space up to 300 square feet.

9. Business InsuranceĚý

You can deduct the cost of your

10. Loan interest

If you have a small business loan, the interest from those loan payments is usually fully deductible as long as the loan is from a traditional lender. If you took out a mortgage or home equity loan for the purpose of building or improving your home office, that mortgage interest is deductible too.

11. Marketing and Advertising

Expenses for advertising your business are fully deductible. This can include billboards, mailers, digital advertising, posters, website design, logo design, business cards, thank you cards, and more.

12. Education and Training

Money spent on training your employees can qualify for deductions. As long as that training is related to your business or trade, you can deduct seminars and webinars, conference tickets, books, and publication subscriptions, for example.

Consult with a Tax Professional

These are just some of the most popular deductions small business owners could take. There are many more items that could qualify. Consult with a tax professional to help you decide how to file, and if it would benefit you to itemize rather than taking the standard deduction.

Whether you claim these as part of your personal income tax, or a will depend on how your business is organized. For example, LLCs have the choice of filing business taxes as a sole proprietor or a corporation.

To find more resources on all things small business taxes, see . For small business taxes in Massachusetts, see .

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Disclaimer: This content is intended to provide general information and shouldn’t be considered legal, tax or financial advice. It’s always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your individual financial situation.

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1. Interest

You can deduct both mortgage interest and home equity loan interest on your taxes. According to , a single filer or married couple filing jointly can deduct up to $750,000 of mortgage interest, and married couples filing separately can deduct $375,000 each. With home equity loan interest, you can only deduct the interest on funds that were used to make home improvements. The max amounts you can deduct on home equity loan interest are the same as mortgage interest.

2. Property taxes

Homeowners can deduct up to $10,000 of their property taxes if filing jointly and $5,000 if filing separately.

3. Energy efficient home improvements

If you made energy efficient home improvements betweeen January 1, 2023 through December 31, 2025, you can qualify for a credit up to $3,200. Up to $2,000 for qualified heat pumps, biomass stoves, or boilersSome examples that count are a new roof, attic insulation, or duct work, and up to $1,200 for energy efficient property costs and certain energy efficient home improvements, with limits on exterior doors ($250 per door and $500 total), exterior windows and skylights ($600) and home energy audits ($150). Note: you must report the Qualified Manufacturer Identification Number (QMID) to qualify for the credit. Read more on .

4. Home office expenses

If you are a self-employed business owner running your business from a home office, you may be able to deduct some of the expenses needed to maintain that space. Only if you use your office regularly and exclusively can you qualify for these deductions. Employees working from home for another company cannot make these deductions. Visit the for more info.

5. Capital gains

are any profits you make on your home when you sell it. If you bought a home for $250,000 and sold it for $300,000, then you would have a capital gain of $50,000. If you have owned and used your home as your primary residence for at least two years in the five-year period prior to its sale, you are eligible to deduct your capital gains. Single filers can exclude up to $250,000 of capital gains from their income while joint filers filing with their spouse can exclude up to $500,000.

6. Private Mortgage Insurance (PMI)

For tax years 2018-2021, you could deduct your PMI payments on mortgages that were taken out after January 1, 2007. The deduction was no longer available as of tax year 2022, and has not changed for .

Standard deductions

Always check with the official IRS website or your tax preparer to make sure you can qualify for all that you would like to deduct, as there are limitations to each item. It’s important to note that itemizing your deductions would only be beneficial to you if the total amount of these items will equal more than the standard deduction. For filing 2025 taxes, the are:

• Married couples filing jointly – $32,200
• Single taxpayers and married individuals filing separately – $16,100
• Heads of households – $24,150

If the total of your deductions do not meet these amounts, then it would make more sense for you to take the standard deduction.

Source: irs.gov.

Disclaimer: This content is intended to provide general information and shouldn’t be considered legal, tax or financial advice. It’s always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your individual financial situation.

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