Why It's Important Now
Under current law, individuals who are putting pre-tax funds into a 401(k) or traditional IRA receive a tax deduction. Tax deductions are good in that they reduce your taxable income.
Under the proposed law, individuals who are putting pre-tax funds into a 401(k) or traditional IRA would receive a tax credit of up to 26%. Tax credits are good in that they reduce your tax bill.
Tax Deductions
Tax deductions will favor individuals with higher income in higher tax brackets.
Tax Credits
If you’re a low to middle-class earner, a tax credit could be better in that it would incentivize more people to start saving.