--- title: How Your 401(k) Plan Benefits Your Tax Return description: There are three basic types of traditional 401(k) plans available that can save you money on your tax return this year. image: https://www.toptaxdefenders.com/hs-fs/file-253510137-jpg/images/piggybankdollar.jpg --- [(866)866-1555](tel:866-866-1555) | [Contact](https://www.toptaxdefenders.com/contact-us) [![Top Tax Defenders](https://www.toptaxdefenders.com/hs-fs/hubfs/images/nov_15/ttd_logo_test_new.png?width=314&height=64&name=ttd_logo_test_new.png "Top Tax Defenders")](https://www.toptaxdefenders.com) # Tax Matters - The Top Tax Defenders Blog # How Your 401(k) Plan Benefits Your Tax Return By Top Tax Staff | Mar 22, 2013 7:00:00 AM | [Tax Credits and Deductions](https://www.toptaxdefenders.com/blog/topic/tax-credits-and-deductions) [![Share on Facebook](https://static.hubspot.com/final/img/common/icons/social/facebook-24x24.png)](http://www.facebook.com/share.php?u=https%3A%2F%2Fwww.toptaxdefenders.com%2Fblog%2Fbid%2F173488%2Fhow-your-401-k-plan-benefits-your-tax-return%3Futm_medium%3Dsocial%26utm_source%3Dfacebook) [![Share on LinkedIn](https://static.hubspot.com/final/img/common/icons/social/linkedin-24x24.png)](http://www.linkedin.com/shareArticle?mini=true&url=https%3A%2F%2Fwww.toptaxdefenders.com%2Fblog%2Fbid%2F173488%2Fhow-your-401-k-plan-benefits-your-tax-return%3Futm_medium%3Dsocial%26utm_source%3Dlinkedin) [![Share on Twitter](https://static.hubspot.com/final/img/common/icons/social/twitter-24x24.png)](https://twitter.com/intent/tweet?original_referer=https%3A%2F%2Fwww.toptaxdefenders.com%2Fblog%2Fbid%2F173488%2Fhow-your-401-k-plan-benefits-your-tax-return%3Futm_medium%3Dsocial%26utm_source%3Dtwitter&url=https%3A%2F%2Fwww.toptaxdefenders.com%2Fblog%2Fbid%2F173488%2Fhow-your-401-k-plan-benefits-your-tax-return%3Futm_medium%3Dsocial%26utm_source%3Dtwitter&source=tweetbutton&text=How%20Your%20401%28k%29%20Plan%20Benefits%20Your%20Tax%20Return) [![Share on Pinterest](https://static.hubspot.com/final/img/common/icons/social/pinterest-24x24.png)](http://pinterest.com/pin/create/button/?url=https%3A%2F%2Fwww.toptaxdefenders.com%2Fblog%2Fbid%2F173488%2Fhow-your-401-k-plan-benefits-your-tax-return%3Futm_medium%3Dsocial%26utm_source%3Dpinterest&media=) [![Share on Email](https://static.hubspot.com/final/img/common/icons/social/email-24x24.png)](mailto:?subject=Check%20out%20https%3A%2F%2Fwww.toptaxdefenders.com%2Fblog%2Fbid%2F173488%2Fhow-your-401-k-plan-benefits-your-tax-return%3Futm_medium%3Dsocial%26utm_source%3Demail%20&body=Check%20out%20https%3A%2F%2Fwww.toptaxdefenders.com%2Fblog%2Fbid%2F173488%2Fhow-your-401-k-plan-benefits-your-tax-return%3Futm_medium%3Dsocial%26utm_source%3Demail) ![How Your 401(k) Plan Benefits Your Tax Return](https://www.toptaxdefenders.com/hs-fs/hubfs/How%20Your%20401(k)%20Plan%20Benefits%20Your%20Tax%20Return.jpg?width=1000&name=How%20Your%20401(k)%20Plan%20Benefits%20Your%20Tax%20Return.jpg) There are three basic types of traditional 401(k) plans available that can [save you money on your tax return](https://www.toptaxdefenders.com/tax-solutions/tax-preparation-help/) this year. Here's an overview of how your 401(k) plan can benefit your tax return. [![ARE YOU CLAIMING ALL THE TAX CREDITS YOU COULD BE? DOWNLOAD YOUR FREE COMPLETE GUIDE TO IRS TAX CREDITS »](https://hubspot-no-cache-na2-prod.s3.amazonaws.com/cta/default/139062/1127c4ea-4332-4cca-a2bb-33b200f10799.png)](https://hubspot-cta-redirect-na2-prod.s3.amazonaws.com/cta/redirect/139062/1127c4ea-4332-4cca-a2bb-33b200f10799) ### Types of 401(k) Plans The most common 401(k) plan is the kind offered by employers to full-time workers and their families. In this scenario, employees contribute a portion of their earnings each week to their retirement plans. The company, in return, matches a percentage of this contribution throughout the year. For example, if a worker contributes $1,000 during a month, then the employer may match up to 50 percent or $500. With a typical 401(k) plan, the worker is not entitled to receive the portion that the company matches until he or she is "fully vested". This may not occur for several years, though, which means that if a worker leaves the job before then, he or she may have to forfeit the company's matched contribution. With a Safe Harbor 401(k) plan, though, workers are fully vested from the beginning, giving them a claim to the entire amount whenever they leave employment. Yet another type of 401(k) plan is the [SIMPLE 401(k)](https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-simple-401k-plan). This plan is exclusively offered for employers who have less than 100 workers. Participants in this plan receive the same benefits as those in a typical 401(k) plan, though the employer may decide not to match employee contributions. ### How 401(k) Plans Benefit Participants 401(k) plans offer several benefits for participants. One advantage is that your [401(k) allows you to defer the tax on your income](https://www.toptaxdefenders.com/blog/bid/165303/Do-IRS-Tax-Deductions-Benefit-the-Rich-More-Than-the-Middle-Class). When you make a contribution to your retirement plan, you can avoid paying tax on that income for the year. Instead, the tax is applied when you receive your withdrawal from the plan, whether that's a few months from now or a few decades from now. The IRS also allows you to defer the tax on the interest, which means that you won't have to pay any tax on the amount that your plan grows over the years. [![DO YOU NEED IRS TAX HELP? SCHEDULE A FREE CONSULTATION WITH OUR TAX EXPERTS »](https://hubspot-no-cache-na2-prod.s3.amazonaws.com/cta/default/139062/758dc20d-7fa2-4e2a-a2ae-b124ff4cd561.png)](https://hubspot-cta-redirect-na2-prod.s3.amazonaws.com/cta/redirect/139062/758dc20d-7fa2-4e2a-a2ae-b124ff4cd561) The key to benefiting from this provision is waiting until you reach retirement age before you withdraw your nest egg. If you wait to retire before making your first withdrawal, then your effective tax rate will be lower, giving you a [sizable tax break](https://www.toptaxdefenders.com/blog/bid/199056/Parents-Take-Advantage-of-These-4-Tax-Breaks-to-Reduce-Your-IRS-Tax-Bill) on the income that you actually earned years earlier. The IRS has also enacted a special tax consideration for low-income individuals who contribute to a retirement plan. The provision is called the Saver's Credit and it allows you to claim a tax credit of up to $2,000, depending on the amount you contribute and your adjusted gross income for the year. Do you participate in a traditional 401(k) plan? Having you been thinking about contributing more to it? Learning about the benefits of 401(k) plans may just convince to make better use of this tax break right now.   [![New Call to action](https://hubspot-no-cache-na2-prod.s3.amazonaws.com/cta/default/139062/285c066c-5c1b-41b4-b426-b5d1ecb0985d.png)](https://hubspot-cta-redirect-na2-prod.s3.amazonaws.com/cta/redirect/139062/285c066c-5c1b-41b4-b426-b5d1ecb0985d) COMMENTS ### SUBSCRIBE VIA EMAIL ### POSTS BY TOPIC - [Tax Tips and Help (287)](https://www.toptaxdefenders.com/blog/topic/tax-tips-and-help) - [IRS Collections (121)](https://www.toptaxdefenders.com/blog/topic/irs-collections) - [IRS Audit (72)](https://www.toptaxdefenders.com/blog/topic/irs-audit) - [Tax Credits and Deductions (69)](https://www.toptaxdefenders.com/blog/topic/tax-credits-and-deductions) - [Tax Resolution (62)](https://www.toptaxdefenders.com/blog/topic/tax-resolution) - [Business Taxes (53)](https://www.toptaxdefenders.com/blog/topic/business-taxes) - [Back Taxes (51)](https://www.toptaxdefenders.com/blog/topic/back-taxes) - [Wage Garnishment (22)](https://www.toptaxdefenders.com/blog/topic/wage-garnishment) - [Tax Levies (19)](https://www.toptaxdefenders.com/blog/topic/tax-levies) - [IRS Payment Plans (15)](https://www.toptaxdefenders.com/blog/topic/irs-payment-plans) - [Tax Liens (14)](https://www.toptaxdefenders.com/blog/topic/tax-liens) - [Offer in Compromise (9)](https://www.toptaxdefenders.com/blog/topic/offer-in-compromise) - [Unfiled Tax Returns (9)](https://www.toptaxdefenders.com/blog/topic/unfiled-tax-returns) - [IRS Tax Attorneys (7)](https://www.toptaxdefenders.com/blog/topic/irs-tax-attorneys) - [Asset Seizure (6)](https://www.toptaxdefenders.com/blog/topic/asset-seizure) - [Tax Evasion (6)](https://www.toptaxdefenders.com/blog/topic/tax-evasion) - [Criminal Tax Defense (4)](https://www.toptaxdefenders.com/blog/topic/criminal-tax-defense) - [Innocent Spouse Relief (4)](https://www.toptaxdefenders.com/blog/topic/innocent-spouse-relief) [see all](https://www.toptaxdefenders.com/blog/bid/173488/how-your-401-k-plan-benefits-your-tax-return#) ### RECENT ARTICLES ### POPULAR ARTICLES Aenean sollicitudin, lorem quis bibendum auctor, nisi elit consequat ipsum. 11222 Richmond Avenue Suite 235, Houston, TX 77082 Copyright 2026 Top Tax Defenders. 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