Pre-tax deductions and your paycheck

A pre-tax deduction comes out of your pay before some taxes are worked out, so it lowers those taxes as well as your take-home pay. A traditional 401(k) contribution lowers federal income tax but not Social Security and Medicare. Health insurance through a cafeteria plan, an HSA and flexible spending accounts lower all three. An after-tax deduction, like a Roth 401(k), changes no tax at all.

That's why a pre-tax deduction costs you less than its face value: put money into a traditional 401(k) and your take-home pay falls by less than the amount you saved, because less federal income tax is withheld. This guide explains which taxes each common deduction lowers, the federal limits, and where states differ.

Pre-tax, after-tax and "taxable wages"

Every tax on a paycheck is figured on its own version of your wages:

• Federal income tax wages: gross pay minus traditional 401(k) or 403(b) deferrals, cafeteria plan health premiums, HSA and FSA contributions.
• Social Security and Medicare wages: gross pay minus cafeteria plan health premiums, HSA and FSA contributions, but not 401(k) deferrals.
• State wages: depends on the state. Most follow the federal income tax rules; a few don't.

On a pay stub, these often appear as different "taxable wages" figures for federal, FICA and state. They're lower than gross pay by the deductions each tax excludes.

The common pre-tax deductions

Traditional 401(k) and 403(b)

Elective deferrals to a traditional 401(k), or salary reductions to a 403(b), come out before federal income tax withholding but are still subject to Social Security and Medicare. In the paycheck calculator you can enter a 401(k) as a percentage of pay or a dollar amount per paycheck.

Health, dental and vision insurance

Premiums you pay through your employer's cafeteria plan (named after Section 125 of the tax code) come out before federal income tax, Social Security and Medicare. If your employer offers insurance, your share of the premium is almost always taken this way.

Health savings account (HSA)

HSA contributions made through payroll are excluded from federal income tax, Social Security and Medicare. The 2026 contribution limits are $4,400 for self-only coverage and $8,750 for family coverage.

Flexible spending accounts (FSA)

A health FSA lets you set aside up to $3,400 in 2026 for medical costs, and dependent care assistance excludes up to $7,500 a year for child or dependent care. Both are excluded from federal income tax, Social Security and Medicare.

What it does to a paycheck

Here's one salary with no deductions, with a 401(k), and with a 401(k) plus health insurance, computed with the same engine as the calculator:

Look at the Social Security and Medicare rows: they don't move when the 401(k) is added, but they fall when health insurance is added. Federal income tax falls in both cases. Take-home pay drops by less than the deductions themselves, because part of the cost is the tax you no longer pay now.

Where states differ

Most states with an income tax follow the federal treatment, so a traditional 401(k), health insurance, an HSA and FSAs lower your state taxable wages too. Some don't:

• New Jersey excludes only 401(k) contributions. Health insurance, FSAs and other cafeteria plan deductions stay in your New Jersey wages, so they don't lower New Jersey income tax.
• California taxes HSA contributions for state income tax and for State Disability Insurance, and counts 401(k) deferrals as wages for SDI.
• State insurance programs often use their own wage definition. Massachusetts Paid Family and Medical Leave, New Jersey's disability and family leave insurance and Minnesota Paid Leave include 401(k) deferrals, while Rhode Island's TDI leaves out both 401(k) and cafeteria plan deductions.

Here's the same example in New Jersey. Compare the state income tax row: it falls when the 401(k) is added, but stays the same when health insurance is added, because New Jersey doesn't exclude cafeteria plan deductions:

New Jersey's unemployment, disability and family leave contributions also appear on that paycheck, and none of them change with either deduction, since all three are figured on wages before 401(k) and cafeteria plan deductions.

Each state calculator applies its own rules, and the "How we calculated this" panel shows which wages each line was figured on.

Reading pre-tax deductions on your pay stub

Pay stubs list deductions in different ways, but you can usually find:

1. Gross pay for the period, before anything comes out.
2. Pre-tax deductions, sometimes marked with an asterisk or listed under "before-tax", such as 401(k), medical, dental, vision, HSA and FSA.
3. Taxable wages for each tax. Federal taxable wages should be gross pay minus all the pre-tax deductions above; Social Security and Medicare wages should be gross pay minus everything except the 401(k).
4. Taxes, each figured on its own taxable wages.
5. After-tax deductions, such as a Roth 401(k).

If a taxable wages figure doesn't match what you'd expect, check whether the deduction runs through a cafeteria plan. Premiums for insurance bought outside your employer's plan, for example, aren't pre-tax on your paycheck at all.

Roth 401(k) and other after-tax deductions

A Roth 401(k) contribution comes out after tax: it doesn't lower federal income tax, Social Security, Medicare or state tax on the paycheck. Other deductions, such as union dues, are usually taken after tax too. In the calculator, a Roth 401(k) lowers take-home pay dollar for dollar, and every tax line stays the same.

Percentages, fixed amounts and the order they come out

Some deductions are set as a percentage of pay and others as a fixed dollar amount each paycheck. A 401(k) is often a percentage: at a higher salary, the same percentage means a larger contribution and a larger cut in federal income tax. Insurance premiums are usually fixed: they cost the same each paycheck whatever you earn that period.

When deductions add up to more than a paycheck can cover, payroll has to decide what to cut. The calculator never lets take-home pay go below zero: it reduces after-tax deductions first, then the 401(k), and shows a note explaining what it changed. Your employer's rules may differ, so check with payroll if a small paycheck comes out lower than expected.

Pre-tax deductions and your W-4

Your employer's payroll system subtracts pre-tax deductions before it applies the withholding tables, so you don't need to enter them on your Form W-4. Entering them again in Step 4(b) would lower withholding twice. The W-4 guide explains what Step 4(b) is for.

Things to check

• Your limits. Contributions above the yearly limits aren't excluded. The calculator warns you if the amounts you enter add up to more than the HSA, FSA or dependent care limits for the year.
• Raises and bonuses. If your 401(k) is a percentage of pay, it rises with a raise. The pay raise calculator shows the new take-home pay with your deductions.
• Hourly pay. Deductions set as a dollar amount stay the same however many hours you work, while percentages move with your pay. The hourly pages, such as what 20 dollars an hour is per year, show the yearly figures to plan from.

These are general rules for employees. Whether a particular plan or contribution is right for you depends on your situation, and a tax or financial professional can help with that.