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Can 401k contributions be completely tax exempt in CA?


i want to contribute 100% of my pay to my 401k. but someone told me 8.25% needs to be held for taxes so i can only contribute 91.75%. is that true? because i thought the purpose of the 401k is to defer tax?

Although 401k is tax deferred for federal and state taxes (in CA) it is not deferred for Social Security and Medicare taxes. You also need to keep in mind to make adjustments for any other deductions you may have (IE medical/dental deductions).

For 2007 the limit is $15,500. If you are 50 or over you can have an addition $5,000 deducted as "catch-up" contribution for a total of $20,500. Source(s): 20 yrs payroll experience/ irs.gov
401(k) defers federal income tax, but not social security and medicare tax. You still have to those taxes.
Also, there is a maximum limit of $14,000/year to contribute to your 401(k), you can't put in more than that.
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