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DeluxeXL t1_j6e9tsf wrote

Because IRA contributions are out of pocket (even if you set up direct deposit through payroll), payroll cannot treat them as pretax deductions. As far as they're concerned, it's just another bank account to deposit your paychecks**. However, this doesn't mean you can't enjoy the tax deduction now. To enjoy the tax deduction now, put the amount you plan to deduct annually on Form W-4 step 4b. This way, payroll will know to withhold less tax because your taxable income is lowered by the amount specified on step 4b.

**Strongly suggest that you do not set up direct deposit into an IRA, because any errors will cause more problems (e.g. excess contribution, reversed mistaken deposit being treated as early withdrawal).

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MitchJay85 OP t1_j6ebbsq wrote

Understood. Thank you very much. This helps a lot.

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nolesrule t1_j6e9hqc wrote

If you want less taxes withheld from pay to offset the deduction for your traditional IRA contribution, you do that by adjusting your W-4 to have less withholding.

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Mysunsai t1_j6e9vbd wrote

Just write $6500 on line 4b of your W4. You now have not withheld taxes on your $6500 IRA contribution.

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