Does a 401(k) reduce the tax on your paycheck?
It reduces your federal income tax, and your state income tax in most states. It does not reduce Social Security or Medicare. The IRS treats an elective deferral to a 401(k) as exempt from income tax withholding and taxable for both payroll taxes, which is why box 1 of your W-2 is lower than boxes 3 and 5.
A Roth 401(k) reduces neither. That money is taxed on the way in, so this year's paycheck sees no change at all; what you buy instead is tax-free growth and tax-free withdrawals later.
Which deductions also cut Social Security and Medicare?
The ones running through a Section 125 cafeteria plan. Your share of employer health, dental and vision premiums, a health FSA, a dependent care FSA, and HSA contributions made by payroll deduction are exempt from federal income tax, Social Security and Medicare alike.
An HSA contribution you make yourself, out of money that has already been through a paycheck, is a different thing. You can still deduct it on your return, but the Social Security and Medicare on it were paid and there is no way back. Where your employer offers payroll deduction, that route is cheaper by 7.65% of whatever you put in.
What does the difference look like in dollars?
Take a single filer on $80,000 in Texas, which levies no income tax of its own, so nothing but the federal rules is moving. Compare no pre-tax deduction at all with $6,000 into a traditional 401(k), and with the same $6,000 into a cafeteria plan.
| Where the $6,000 went | Federal income tax | Social Security and Medicare |
|---|---|---|
| Nowhere | $8,770 | $6,120 |
| Traditional 401(k) | $7,450 | $6,120 |
| Cafeteria plan | $7,450 | $5,661 |
Both routes save the same $1,320 in federal income tax, because both leave the income tax base. Only the cafeteria plan also takes the $6,000 out of the Social Security and Medicare base, and that is worth a further $459.
None of this is an argument for one over the other. They buy different things, retirement savings against this year's medical costs, and the point is only that the effect on a paycheck is not the same.
How much can you put in for 2026?
The elective deferral limit for a 401(k), a 403(b) or a governmental 457(b) plan is $24,500. From the year you turn 50 you may add a catch-up of $8,000, and for the years you are 60 to 63 that catch-up is $11,250 instead.
If your wages from that employer in 2025 were above $150,000, your catch-up in 2026 has to be a Roth contribution, so it will not lower this year's taxable pay.
An HSA takes $4,400 for self-only coverage and $8,750 for family coverage. A health FSA takes $3,400, with up to $680 carried into the next year where the plan allows it.
Do the states follow the federal rules?
Mostly, and not always. Pennsylvania taxes 401(k) deferrals in the year you make them, and several states do not follow the federal treatment of an HSA, so the contribution is added back to that state's taxable base.
Which pre-tax deductions a state follows is set out on each state's page, beside that state's own rates.
How do you see this on your own numbers?
Put your salary and your deductions into the take-home pay calculator. It keeps the three bases apart, so a 401(k) moves the federal and state lines and leaves Social Security and Medicare where they were.
Changing a plan election is also a reason to look at your withholding again, because less taxable pay means less tax to hold back. The W-4 guide covers which step of the form does that.