If you’re contributing to a 401(k), you’ve probably noticed that your take-home pay looks different than your gross salary. That’s because 401(k) contributions come out of your paycheck before federal and state income taxes are applied, which lowers your taxable income. The good news? This usually means you pay less in taxes today while building savings for retirement.
Here’s a clear breakdown of how to estimate your paycheck when 401(k) contributions are involved.
Understanding How 401k Deductions Work
- Pre-tax contributions: Traditional 401(k) contributions are taken out before federal and state income taxes. This lowers your taxable income, so you may owe less in taxes each pay period.
- FICA taxes: Social Security and Medicare (FICA) are still calculated on your full gross pay. 401(k) contributions don’t reduce those.
- Employer match: If your employer matches contributions, that money doesn’t come out of your paycheck—it’s an extra benefit.
Step-by-Step: Estimating Your Paycheck
Here’s a simple way to calculate your net pay after 401(k) deductions:
- Start with your gross salary.
Example: $60,000 per year. - Divide by the number of paychecks.
Biweekly pay (26 checks): $60,000 ÷ 26 = $2,307. - Subtract your 401k contribution.
Let’s say you contribute 10% → $2,307 × 10% = $231.
Taxable income for the paycheck = $2,307 – $231 = $2,076. - Apply federal and state income tax.
Use your tax bracket and withholding rates to estimate. - Apply FICA (6.2% Social Security + 1.45% Medicare = 7.65%).
Remember, this is based on gross pay ($2,307), not the reduced taxable amount. - Subtract other deductions.
Health insurance, HSA, or other pre-tax benefits if applicable.
Example: Biweekly Paycheck With Different 401k Contributions
| Gross Pay (Biweekly) | 401k Contribution % | 401k Contribution | Taxable Income | Estimated Net Pay* |
|---|---|---|---|---|
| $2,307 | 0% | $0 | $2,307 | ~$1,730 |
| $2,307 | 5% | $115 | $2,192 | ~$1,650 |
| $2,307 | 10% | $231 | $2,076 | ~$1,570 |
| $2,307 | 15% | $346 | $1,961 | ~$1,490 |
*Net pay estimates assume average federal withholding, state tax, and FICA but will vary based on location, dependents, and filing status.
FAQs About 401k and Your Paycheck
Does contributing to a 401k reduce my taxes?
Yes, it reduces your taxable income for federal and state income taxes, but not FICA.
Does a 401k affect Social Security or Medicare deductions?
No, those are calculated from your gross pay before 401k contributions.
What is the maximum 401k contribution in 2025?
For 2025, the IRS allows up to $23,000 for those under 50, and $30,500 with the catch-up contribution (50+).
How do I know how much to contribute?
A common starting point is 5–10% of your salary, but it depends on your financial goals and budget.
Bettye is the creator of CityPaycheckCalculator.com, a resource designed to help individuals quickly and accurately estimate their take-home pay across U.S. cities. With a strong focus on clarity, accuracy, and user experience, Bettye provides reliable paycheck calculators and helpful insights to support smarter financial decisions. Her mission is to make complex payroll and tax information simple and accessible for everyone.