Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income — Retirement Income; Form 1040, Lines 15-16

Retirement Plan Distributions

Before-Tax or After-Tax Contributions

Retirement plans are funded by either "before-tax" or "after-tax" contributions.

  • Before-tax simply means that the employee did not pay taxes on the money at the time it was contributed, that is, the taxpayer has no cost basis in the plan.
  • After-tax means the employee paid taxes on the money when it was contributed, that is, the taxpayer has a cost basis in the plan.

If the taxpayer made all contributions to a plan with before-tax dollars, the entire distribution will be fully taxable. The funds are taxed at the time of the distribution because neither the contributions nor the earnings/investment gains were previously taxed. This is common in 401(k) and Thrift Savings plans.


If the taxpayer did not contribute to the retirement plan, all the distributions are fully taxable.