2025 401K Contribution Question

[SavingBucks]

DH is planning to retire at the end of 2024. He has already made the maximum 401K contributions for the 2024 tax year. Everything has been pretax. The last 2 weeks of December are considered part of 2025 income and he will contribute those monies towards his 401K limits for the 2025 tax year. However -- he will be issued a check in spring 2025 (uncertain if it is before April 15th) for vacation hours that were earned in 2024. This has been done annually since he has worked there. Here's the question -- can he legally contribute these monies towards his 2025 401K? He can allocate 90% of those monies ahead of time online through Fidelity but I want to make sure that there will be no issues. The check stub usually states a certain amount for hours worked.

Thanks in advance!

[disneysteve]

Income is typically counted for the tax year in which it was paid, not the year in which it was earned so that should be just fine.

You can go back and check how you reported that income in prior years. Did you include the 2022 vacation pay on your 2023 taxes? I'm betting you did.

[Jluke]

The 2025 contribution will ultimately be decided by the 401k plan administrator. They won’t let you exceed the limits for 2024.

I would just pay attention to the paystub and 401k account when that money is paid.

[SavingBucks]

Thank you for the feedback. Yes, we paid the 2022 vacation pay on the 2023 tax return.

[LivingAlmostLarge]

Year it's paid. When you leave all vacation even if earned 10 years ago and you've been accruing a day at a year is paid out when you leave. That is why companies are moving to use or lose. Then vacation isn't paid out and a debt/liability on the books. Also why some go to unlimited vacation.