Elective Salary Deferrals

If you are covered by certain kinds of qualified retirement plans, such as a 401(k) plan, you can reduce your income tax for the current year by having part of your salary paid tax-free into the retirement account rather than being paid to you.  While the amount contributed is not subject to federal income tax, it is subject to social security and Medicare taxes.  Your employer reports the deferred amount in box 12 of your W-2 and the "Retirement plan" box 13 should be checked.

Qualified Retirement Plans

Elective deferrals include contributions to the following types of qualified retirement plans:

1. Cash or deferred arrangements (section 401(k) plans).
2. The Thrift Savings Plan for federal employees.
3. Salary reduction simplified employee pension plans (SARSEP).
4. Savings incentive match plans for employees (SIMPLE plans).
5. Tax-sheltered annuity plans (403(b) plans).
6. Section 501(c)(18)(D) plans.
7. Section 457 plans.