The federal government is set to provide up to $25,000 in tax relief to most Americans in 2017, but it may be too late to qualify for the offer.
The new tax relief will allow most Americans to contribute up to an additional $25 a year to a tax-advantaged retirement account.
But, as The Washington Post notes, some Americans are likely to face the most trouble with the offer, because their current 401(ks) aren’t tax-deferred and won’t be.
That’s because their employer will have to make a contribution, which the government has deemed a “tax-free” lump sum.
This means that most workers are already paying a tax on the money they contribute to their 401(kish), and employers are likely going to have to start contributing in order to get a tax break.
So, if you’re currently paying a $10,000 payroll tax and have $25 million invested in a 401(ki), your tax bill could balloon to $50,000.
If you’re not currently receiving the tax break, the IRS has provided a workaround.
Employers that have already started making contributions will be able to retroactively retroactively receive the tax relief in 2017.
Some 401(kas) also have tax-exempt status, meaning they don’t have to pay any income taxes.
And, if your employer hasn’t made a contribution yet, the tax credit can be used up in the first 10 years of the account.
If you’re thinking about investing in a new 401(l), you may want to take advantage of the new tax break to get the most bang for your buck.