Current Contribution Percentage

• If you already contribute to your company's 401(k) plan, the amount of your bonus might already be subject to 401(k) deductions. Many companies deduct the 401(k) percentage from all income, including wages, overtime and bonus payments. You can check with your human resources department to determine whether 401(k) money will come out of your bonus.
  
  

Raise Your Contributions

• If you know your bonus is imminent, you can shelter more of that income from taxes by raising your 401(k) contribution percentage before the paycheck containing the bonus is issued. Be sure to plan ahead, since it can take several pay periods for the new contribution percentage to take effect. You can plan by finding the date you received your bonus last year and raising your contribution percentage a month ahead of time. That will give your employer time to adjust their records and give you the chance to save even more money in your 401(k).
  
  

Contribution Limits

• You can shelter more of your bonus from taxes by increasing the percentage you contribute to your 401(k) plan, but only within the contribution limits established by the IRS. Regardless of the source of the income, you are still subject to the contribution limits set for 401(k) plans. For 2010 and 2011, you can contribute up to $16,500 to your 401(k) if you are 49 and younger and up to $22,000 if you are 50 and older. Once you reach that maximum contribution level for the year, you will not be able to direct any more money into the plan.
  
  

Plan Your Taxes

• If you expect to get a bonus from your employer, it is a good idea to do some tax planning to determine how that bonus will impact your taxable income and your potential tax liability. If you already know the amount of your bonus for the current year, you can plug those hard numbers into a tax preparation software package. If you do not know how much you will get, you can use the bonus you received last year as a guide. Taking the time to plan ahead can help you shelter more of your bonus from taxes by directing more to your 401(k). Knowing how much you might owe also allows you to put money aside for taxes.