Your 401(k), wages and your tax return

Ask NJMoneyHelp


Q. I am above 65, collecting Social Security and have a questions on wages. My wife and I are both working part time and are able to contribute still to a 401(k). For reporting income, do we enter the taxable portion of our income, leaving out the 401(k) savings? We’re trying to beef up our accounts.
— Still working

A. We’re glad to see you continue to save.

Your tax return will involve several steps.

First, take a look to see if part of your Social Security benefit is taxable.

IRS Publication 915 provides a detailed explanation and worksheet to help you figure it out.

Typically for married filing jointly, if your modified adjusted gross income (MAGI) is more than $32,000, then a portion of your Social Security benefits will be taxable, said Altair Gobo, a certified financial planner with U.S. Financial Services in Fairfield.

Once you’ve determined how much, if any, of your Social Security is taxable, you can complete your 1040.

“At that time you will include all of your annual income, dividends, interest, etc. and the portion of your Social Security that is taxable,” Gobo said. “Your 401(k) contributions would reduce your taxable income.”

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