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Note: this page is about a North Dakota Traditional 401(k) (Individual)
For federal Traditional 401(k) (Individual), or a Traditional 401(k) (Individual) in another state, click here.
2021
North Dakota
Traditional 401(k) (Individual)
Choose an applicable year
2022
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2021
Overview
An employer-sponsored retirement plan that allows business and employees to contribute pre-tax dollars and reduce taxable income.
Conformity Type:Rolling Conformity - Automatically update when federal IRC codes change
Commonly referred to as 401(k), employer-sponsored retirement account and workplace retirement account
Strategy Details
Related Resources
Overview
An employer-sponsored retirement plan that allows business and employees to contribute pre-tax dollars and reduce taxable income.
Conformity Type:Rolling Conformity - Automatically update when federal IRC codes change
Commonly referred to as 401(k), employer-sponsored retirement account and workplace retirement account
Do I Qualify for a Traditional 401(k) (Individual)?
A traditional 401(k) plan is a workplace retirement account offered by an employer. As an employee, you can make pretax contributions through payroll deductions.
2021
North Dakota Traditional 401(k) (Individual) Details
Traditional 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts. This is a common method for business owners to reduce taxes, save for retirement, and create valuable benefits for their employees. Many states honor federal deductions to 401(k) plans, creating additional tax savings benefits at the state level.
Key traditional 401(k) benefits include the following:
- Elective salary deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals).
- Employers can contribute to employees’ accounts, which creates a tax deduction for the business.
- Distributions, including earnings, are includible in taxable income at retirement (except for qualified distributions of designated Roth accounts).
Contributions limits do apply, but with the Corvee tax planning software, you can see what tax savings you can accomplish based on your specific contribution goals.
There Are Thousands of Other Tax Planning Strategies Your Clients Are Missing Out On
Learn how Corvee can help you save your clients money in taxes.
Benefits
Participants may contribute more to this type of plan than to an individual retirement account (IRA).
This is a good plan if cash flow is an issue.
Optional participant loans and hardship withdrawals add flexibility for participants.
Earnings in the 401(k) accumulate tax-deferred.
The taxpayer receives a current-year income deduction for 401(k) contributions.
Considerations
Distributions from a traditional 401(k) are treated as ordinary income.
Distributions from the 401(k) may be subject to 10% penalty if taken before age 59½.
Conflicting strategies: Solo 401(k) Tax Strategy for Individuals, SIMPLE IRA Tax Strategy for Individuals, SIMPLE 401(k) Tax Strategy for Individuals
Assumptions When Taking the Traditional 401(k) (Individual)
The employer has a traditional 401(k) plan in place and wishes to make the maximum allowable matching contribution.
You are willing to allocate a portion of your income to your employer’s traditional 401(k) plan.
Requirements to Claim the Traditional 401(k) (Individual)
The company may impose restrictions, such as only allowing you to contribute after you have worked at the company for a certain period of time.
Conflicting Strategies
StrategySIMPLE401KIndividual
StrategySIMPLEIRAIndividual
Business Entities That Can Claim the Traditional 401(k) (Individual)
Individual
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All State-Level 2021 Traditional 401(k) (Individual) Details
See the federal level strategy here.
To learn more about how a Traditional 401(k) (Individual) is calculated in each state, click on your state below.
States with Traditional 401(k) (Individual)
Arizona
Alabama
Arkansas
California
Colorado
Connecticut
District of Columbia
Delaware
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
New Jersey
New Mexico
New York
North Carolina
North Dakota
Oklahoma
Oregon
Rhode Island
South Carolina
Utah
Vermont
Virginia
West Virginia
Wisconsin
Stay tuned for more information on these states in the future.
Alaska
Florida
Nevada
New Hampshire
Ohio
Pennsylvania
South Dakota
Tennessee
Texas
Washington
Wyoming
Additional Tax Strategies You May Qualify For
Those who typically qualify for a Traditional 401(k) (Individual) could also save money in taxes by using the following additional tax planning strategies:
SIMPLE IRA (Individual)
Contribute pretax earnings to a tax-favored retirement account
SIMPLE 401(k) (Individual)
Make pretax contributions to a streamlined employer-sponsored plan
Roth 401(k)
A salary-deferral retirement plan funded with after-tax contributions
See All Strategies
The material discussed on this page is meant for general illustration and/or informational purposes only and is not to be construed as investment, tax, or legal advice. You must exercise your own independent professional judgment, recognizing that advice should not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. Further, any advice you provide in connection with tax return preparation must comply in full with the requirements of IRS Circular 230.
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