Which of these retirement plans do NOT qualify for a federal income tax deduction?

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Multiple Choice

Which of these retirement plans do NOT qualify for a federal income tax deduction?

Explanation:
Roth IRA contributions are made with after-tax dollars, so you don’t receive a tax deduction for the amount you contribute in the year you contribute. The benefit of a Roth comes later: earnings grow tax-free and qualified withdrawals are tax-free. In contrast, traditional IRA, SEP IRA, and 401(k) plans are designed to provide a deduction in the contribution year (subject to income and participation rules for traditional IRAs; SEP and 401(k) employer contributions reduce the business’s or individual’s taxable income). So the plan that does not offer a federal income tax deduction for contributions is the Roth IRA.

Roth IRA contributions are made with after-tax dollars, so you don’t receive a tax deduction for the amount you contribute in the year you contribute. The benefit of a Roth comes later: earnings grow tax-free and qualified withdrawals are tax-free. In contrast, traditional IRA, SEP IRA, and 401(k) plans are designed to provide a deduction in the contribution year (subject to income and participation rules for traditional IRAs; SEP and 401(k) employer contributions reduce the business’s or individual’s taxable income). So the plan that does not offer a federal income tax deduction for contributions is the Roth IRA.

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