What "pre-tax" means
A traditional 401(k) contribution comes out of your pay before federal income tax is figured. So your taxable income drops by the amount you contribute, and so does your income tax. That's why putting $5,000 in doesn't cut your take-home pay by $5,000.
The example, step by step
On a $50,000 salary, single filer, the 2026 standard deduction of $16,100 leaves $33,900 of taxable income, and federal income tax comes to about $3,820. Contribute $5,000 and taxable income falls to $28,900; tax falls to about $3,220. You save $600 in tax, so take-home drops by $4,400. Paid every two weeks, that's $192.31 going in per paycheck but only $169.23 less in your check.
The marginal-rate shortcut
Each dollar you contribute comes off the top of your income, so it saves tax at your marginal (top) bracket rate. In the 12% bracket, $100 in costs about $88 of take-home; in the 22% bracket, about $78. If a contribution crosses a bracket boundary, the calculator's full bracket math handles it.
What doesn't change
FICA taxes (Social Security and Medicare, 7.65% for employees) still apply to 401(k) contributions. The Social Security part stops at the 2026 wage base of $184,500. State income taxes aren't included here and vary by state.
Tax-deferred, not tax-free
Traditional 401(k) money is taxed when you withdraw it. Withdrawals before 59½ usually also face a 10% additional tax unless an exception applies, and required minimum distributions generally start at age 73. So the tax savings now are a trade: less tax today, taxable income later. The Roth vs traditional page shows how that trade depends on tax rates.
2026 limits
Employees can contribute up to $24,500 in 2026. If you're 50 or older, the catch-up adds $8,000; at ages 60 to 63, the catch-up is $11,250 instead. Employer contributions count toward a separate $72,000 total limit.
Sources
- IRS: 2026 tax inflation adjustments (Rev. Proc. 2025-32)
- IRS: 2026 401(k) and IRA limits (IR-2025-111)
- SSA: contribution and benefit base
- IRS Topic 558: additional tax on early distributions
- IRS: required minimum distributions FAQs
Last reviewed: Sep 28, 2026