Originally posted by ScottW
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For example, if he took $24,500 of payroll and bought a car, he is paying $4000 in Social Security and Medicare tax plus the $8000 of income taxes (for a total of $12,000 of taxes). If he takes $24,500 and contributes it to a 401k, he is paying $4000 in Social Security and Medicare taxes and $0 of income tax. So the 'net' savings is $8,000.
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