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Understanding 401(k) Tax Rules for 2025

Understanding these guidelines can keep you out of trouble with the IRS.

By Kailey Hagen – Updated Nov 21, 2024 at 5:00PM

Key Points

  • 401(k) contributions are tax-deferred, reducing your taxable income and possibly your tax bracket.
  • Withdrawals from 401(k)s are taxed as ordinary income, which could be lower in retirement.
  • Avoid early withdrawal penalties by ensuring these withdrawals qualify for exceptions like large medical expenses.
Key findings are powered by ChatGPT and based solely off the content from this article. Findings are reviewed by our editorial team. The author and editors take ultimate responsibility for the content.

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