Your 401(k) contribution shows up on every pay stub, but do you understand how it affects your taxes? Here's the complete guide to pre-tax vs Roth…
By ExpertPaystubs Editorial Team. Published 2026-02-18
Your 401(k) contribution is often the largest voluntary deduction on your pay stub. Understanding how it works — and the difference between traditional (pre-tax) and Roth (post-tax) contributions — can save you thousands in taxes over your career.
2026 Contribution Limits
| Limit Type | 2026 Amount |
|---|---|
| Employee contribution limit | $23,500 |
| Catch-up contribution (age 50+) | $7,500 |
| Total limit (employee + employer) | $70,000 |
| Super catch-up (ages 60-63) | $11,250 |
Pre-Tax 401(k): How It Shows on Your Pay Stub
Traditional 401(k) contributions are deducted before federal and state income taxes are calculated:
Gross Pay: $4,000.00
Pre-Tax 401(k) (6%): -$240.00
Taxable Income: $3,760.00 ← taxes calculated on this
Federal Tax: -$367.00
State Tax: -$150.00
Social Security (6.2%): -$248.00 ← calculated on full $4,000
Medicare (1.45%): -$58.00 ← calculated on full $4,000
Net Pay: $2,937.00
Key insight: Pre-tax 401(k) reduces your federal and state income tax but does NOT reduce FICA taxes (Social Security and Medicare are always calculated on gross pay).
Roth 401(k): How It Shows on Your Pay Stub
Roth contributions are deducted after taxes:
Gross Pay: $4,000.00
Federal Tax: -$392.00 ← calculated on full $4,000
State Tax: -$160.00
Social Security (6.2%): -$248.00
Medicare (1.45%): -$58.00
Post-Tax Roth 401(k) (6%): -$240.00
Net Pay: $2,902.00
You pay more in current taxes, but withdrawals in retirement are completely tax-free.
Pre-Tax vs Roth: Annual Tax Impact
For someone earning $80,000/year contributing 10% ($8,000):
| Factor | Pre-Tax 401(k) | Roth 401(k) |
|---|---|---|
| Contribution | $8,000 | $8,000 |
| Federal tax savings (now) | ~$1,760 | $0 |
| State tax savings (now) | ~$400 | $0 |
| Tax on withdrawal (retirement) | Full amount taxed | $0 |
| Annual take-home difference | +$2,160 | -$2,160 |
When to Choose Pre-Tax
- You're in a high tax bracket now and expect to be in a lower bracket in retirement
- You need the maximum take-home pay today
- You're close to retirement (fewer years for Roth growth)
When to Choose Roth
- You're early in your career with a lower income
- You expect to be in a higher tax bracket in retirement
- You want tax-free income in retirement
- You're concerned about future tax rate increases
Employer Match
Employer matching contributions are always pre-tax, regardless of whether your contributions are pre-tax or Roth. Watch for these on your pay stub:
- Your contribution: Shows as a deduction
- Employer match: May show as a separate line or only appear on your 401(k) statement
Common match formulas:
- 50% match up to 6% of salary (most common)
- 100% match up to 3%, then 50% up to 5%
- Dollar-for-dollar up to 4-6%
How to Verify on Your Pay Stub
Check these items every pay period:
- Correct percentage: Verify your elected contribution rate
- Pre-tax vs post-tax placement: Pre-tax should reduce taxable income; Roth should not
- YTD total: Watch to ensure you don't exceed $23,500
- FICA calculation: Should be based on GROSS pay, not reduced pay