How Much Does a 401(k) Save on Taxes? 2026 Calculator Guide
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How 401(k) Contributions Reduce Your Taxes
When you contribute to a traditional 401(k), the contribution is deducted from your gross income before federal and state income taxes are calculated. This means you pay less in taxes now and the money grows tax-deferred until retirement.
Key facts for 2026:
- Maximum 401(k) contribution: $24,500 (under 50) / $32,500 (50 and over)
- 401(k) reduces federal and state income tax
- 401(k) does not reduce Social Security or Medicare (FICA) taxes
Tax Savings Examples
$75,000 Salary, Single Filer in California
| 401(k) Contribution | Federal Savings | State Savings | Total Savings | Effective Cost |
|---|---|---|---|---|
| $0 | - | - | - | - |
| $5,000 | $1,100 | $465 | $1,565 | $3,435 |
| $10,000 | $2,200 | $930 | $3,130 | $6,870 |
| $24,500 (max) | $5,390 | $2,279 | $7,669 | $16,831 |
At a 22% federal bracket and ~9.3% California marginal rate, every $1,000 contributed saves roughly $313 in taxes.
$100,000 Salary, Married Filing Jointly in Texas
| 401(k) Contribution | Federal Savings | State Savings | Total Savings |
|---|---|---|---|
| $5,000 | $600 | $0 | $600 |
| $10,000 | $1,200 | $0 | $1,200 |
| $24,500 (max) | $2,940 | $0 | $2,940 |
In Texas (no state income tax), the savings are purely from federal tax reduction.
401(k) vs. HSA vs. Health Insurance Deductions
| Deduction Type | Reduces Federal Tax | Reduces State Tax | Reduces FICA |
|---|---|---|---|
| 401(k) / 403(b) | Yes | Yes | No |
| Health Insurance (Section 125) | Yes | Yes | Yes |
| HSA | Yes | Yes | Yes |
| Roth 401(k) | No | No | No |
HSA contributions provide the best tax benefit because they reduce all three tax categories. However, HSAs require a high-deductible health plan.
Try our salary calculator with the pre-tax deductions section to see your exact savings.
