Pre-tax deductions (2026) | PaycheckByState

What are pre-tax deductions?

Pre-tax deductions come out of your gross pay before income tax is calculated, so they lower your taxable wages and your tax bill. Because the tax you save partly offsets the money you set aside, a $100 pre-tax contribution costs less than $100 of take-home pay.

Which taxes each deduction reduces

Deduction	Federal income tax	Social Security & Medicare	State income tax
Traditional 401(k) / 403(b)	Reduced	Not reduced	Reduced in most states (not PA, NJ)
Roth 401(k)	Not reduced	Not reduced	Not reduced
HSA through payroll	Reduced	Reduced	Reduced (not CA, NJ)
Health premiums (Section 125)	Reduced	Reduced	Reduced in most states
Health FSA / dependent care FSA	Reduced	Reduced	Reduced in most states

Traditional 401(k) and 2026 limits

For 2026 you can defer up to $24,500 into a 401(k), 403(b) or 457 plan. Workers 50 and older can add an $8,000 catch-up (total $32,500), and those aged 60–63 have a higher catch-up limit of $11,250. IRA limits are $7,500 plus a $1,100 catch-up. Contributions come out of each paycheck before federal income tax but are still subject to Social Security and Medicare.

Roth vs traditional

A Roth 401(k) is funded with after-tax money, so your take-home pay falls by the full contribution — but qualified withdrawals in retirement are tax-free. A traditional contribution lowers your tax now and is taxed on withdrawal. A rough rule: choose traditional if you expect a lower tax rate in retirement, Roth if you expect a higher one. Many people split contributions.

HSA and FSA

A health savings account (available with a high-deductible health plan) allows $4,400 (self-only) or $8,750 (family) in 2026, plus a $1,000 catch-up at 55. Payroll HSA contributions avoid income tax and FICA — the best tax treatment of any account. Flexible spending accounts (health and dependent care) also come out before tax and FICA, but unused balances are subject to plan rules, so check your employer's carryover or grace-period terms.

Health premiums through a Section 125 plan

If your employer offers a cafeteria plan, your share of medical, dental and vision premiums usually comes out pre-tax, lowering income tax and FICA. The savings appear automatically on your pay stub.

State exceptions to know

Pennsylvania and New Jersey tax 401(k) deferrals as state wages.
California and New Jersey do not exclude HSA contributions from state taxable income.
Most Ohio municipal income taxes apply to gross wages, ignoring 401(k) deferrals.

Our calculator models these exceptions. Pick your state in the calculator to see the exact result.

Worked example: a $6,000 traditional 401(k) on a $75,000 salary

State	Take-home drops by	Tax saved	Effective cost of $1 saved
Texas (no state income tax)	$4,680	$1,320	0.78
California	$4,200	$1,800	0.70
Pennsylvania (no state exclusion)	$4,680	$1,320	0.78

The tax saved depends on your federal bracket plus your state's treatment. Use our state pages to see the same analysis for every state.

Frequently asked questions

Do pre-tax deductions reduce Social Security and Medicare tax?

Traditional 401(k) contributions do not reduce Social Security and Medicare (FICA) wages. HSA contributions and health premiums paid through a Section 125 cafeteria plan do.

What is the 2026 401(k) contribution limit?

$24,500 for employee deferrals, plus a $8,000 catch-up for age 50 and older ($32,500 total) and a higher $11,250 catch-up for ages 60–63.

What is the 2026 HSA limit?

$4,400 for self-only coverage and $8,750 for family coverage in 2026, plus a $1,000 catch-up if you are 55 or older.

Is a Roth 401(k) better than a traditional 401(k)?

It depends on whether your tax rate is higher now or in retirement. Roth costs more take-home today but is tax-free later; traditional saves tax now.