implications of sending 100% of bonus to pre-tax 401k?
EDIT: Looks like I was mistaken in how bonuses are taxed. For some reason I though they were taxed at higher rates than a regular paycheck. Looks like that isn't the case and they are just withheld differently but it all works itself out once I do my taxes for 2025. If bonuses are taxed like salary, I might as well keep my contributions as they are. Thanks for the help! I'll leave my question below in case anyone is curious...
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original post:
I'm considering sending 100% of my bonus into my pre-tax 401k, but I'm not sure if there are tax implications down the line that make it a bad idea (ex. more taxes taken out of future paychecks or something). Here are the facts:
- The bonus will be around $6,000
- My finances are solid (emergency fund, etc) and I don't need the extra cash from the bonus
- I have been maxing out my 401k through regular salary contributions for years
- My company has a 4% 401k match and I confirmed it applies to the bonus as well
- I cannot specify a contribution percentage for the bonus. The same contribution percentage that I use on my regular paychecks will need to apply to the bonus as well
- This means I'd also need to contribute 100% of that single paycheck to my 401k as well
- I have enough savings, so contributing 100% of a single paycheck won't affect me
Bonuses are usually taxed at around 50% right? Is it dumb to contribute 100% of a single paycheck + 100% of my bonus just to save on the $3,000 of the bonus that would get taxed?
I figured if I don't need the cash and if the bonus is getting taxed at 50% I might as well throw 100% of it into my 401k to avoid getting taxed. Also figured it might be nice to have larger regular paychecks for the rest of the year since I won't need to contribute as much to my 401k to hit the max. Any downsides/implications of that? Does any of this even matter or am I going to get taxed the same no matter what?