Deduction tax treatment
A $200 deduction does not always lower take-home pay by $200
A traditional 401(k) salary deferral generally reduces federal income-tax wages but not FICA wages. A qualifying pre-tax health premium can reduce both. A Roth contribution reduces cash pay without excluding that contribution from current taxable wages.
The examples assume eligible ordinary employees, valid plan elections within applicable limits, a $3,000 biweekly Texas paycheck and the baseline single W-4. Special ownership, plan, state-tax and benefit-limit rules can change an exclusion.
Identify what the deduction is allowed to exclude
Ask payroll which wage bases the election changes. A label such as 'pre-tax' alone does not answer that question. In this example, the health premium is paid through a qualifying Section 125 arrangement and fully excluded from federal income-tax, Social Security and Medicare wages. An employee who simply buys insurance with after-tax cash cannot assume the same payroll treatment.
Three alternative $200 elections
The same $78,000 salary is paid over 26 checks. Step 2 is unchecked, Steps 3-4 are blank, and year-to-date wages are below the FICA thresholds. Each election is considered alone.
| Deduction | Income-tax / FICA wages | Federal withholding / FICA | Net pay |
|---|---|---|---|
| None | $3,000 / $3,000 | $320.38 / $229.50 | $2,450.12 |
| $200 traditional 401(k) | $2,800 / $3,000 | $276.38 / $229.50 | $2,294.12 |
| $200 qualifying health premium | $2,800 / $2,800 | $276.38 / $214.20 | $2,309.42 |
| $200 Roth 401(k) | $3,000 / $3,000 | $320.38 / $229.50 | $2,250.12 |
Read the cash tradeoff, not just the tax line
The traditional 401(k) election reduces current withholding by $44, so transferring $200 to retirement lowers cash pay by $156. The health election also reduces FICA by $15.30; its $200 premium lowers cash pay by $140.70. The Roth election leaves these taxes unchanged and lowers cash by the full $200.
These are current paycheck effects. They are not an investment-return comparison, a recommendation to choose one account, or a prediction of lifetime tax savings. The money used for a health premium buys coverage; a retirement contribution remains in a retirement account subject to its distribution rules.
Put each amount into the calculator once
Run the traditional 401(k) case or run the qualifying health premium case. A FICA-exempt amount in this tool also reduces federal taxable wages. Do not put the same health premium in both deduction fields.
For the Roth comparison, start with the no-deduction calculation and subtract the $200 after-tax contribution from its $2,450.12 result. The current calculator does not have a separate after-tax deduction input. Using either pre-tax field for Roth would incorrectly lower taxes. Apply the same distinction to an after-tax loan repayment or other cash deduction.
Check what changes later in the year
Above the Social Security wage base, an additional qualifying health deduction may no longer reduce current Social Security withholding. Additional Medicare can affect another wage range. The table therefore cannot be multiplied mechanically into a savings promise for every salary. Benefit eligibility and annual contribution limits also need separate checks.
Common double counting
Federal taxable wages already exclude the traditional deferral in this example. Entering it again in W-4 Step 4(b) would reduce the income basis twice. An employer retirement match is a separate employer contribution, not another subtraction from the employee's deposit. Confirm both distinctions on the payroll election and statement.
Sources checked September 7, 2026: IRS contribution withholding table, 2026 Publication 15-B, IRS designated Roth account FAQ, and 2026 Publication 15-T. The comparison uses hypothetical elections and separately calculated tax bases.