How 401(k) Contributions Affect Take-Home Pay

Short answer: A pre-tax 401(k) contribution reduces your take-home pay by less than the contribution amount because it lowers your federal (and most state) income tax withholding. However, pre-tax 401(k) deferrals do not reduce Social Security or Medicare (FICA) taxes.

No FICA Tax Savings on Pre-Tax 401(k)

Unlike HSA or Section 125 health insurance premiums, employee 401(k) contributions are still subject to:

• Social Security (OASDI): 6.2% up to the 2027 wage base of $192,300 (maximum employee OASDI tax of $11,922.60, per SSA announcement October 14, 2026).
• Medicare: 1.45% on all covered wages (no cap), plus an additional 0.9% Medicare surtax above $200,000 single / $250,000 married filing jointly (not indexed).

2027 Federal Income Tax Brackets (Reference Only)

Per IRS Rev. Proc. 2026-35 (November 5, 2026), the 2027 standard deduction is $16,600 (Single), $33,200 (Married Filing Jointly), and $24,925 (Head of Household). Tax rates remain 10%, 12%, 22%, 24%, 32%, 35%, and 37%:

• Single: 10% to $12,800; 12% to $52,025; 22% to $109,125; 24% to $208,325; 32% to $264,550; 35% to $661,375; 37% above.
• Married Filing Jointly: 10% to $25,600; 12% to $104,050; 22% to $218,250; 24% to $416,650; 32% to $529,100; 35% to $793,650; 37% above.