Guide
A 401(k) deferral skips income tax but not payroll tax. An HSA skips both. Here is what each account saves, with 2026 limits.
Not every dollar of your salary reaches the tax brackets. Certain payroll deductions come out before tax is calculated, which lowers the income the IRS sees. The savings are real and immediate — but the three main accounts are taxed differently from each other, and the differences matter more than most benefits packets explain.
| Account | 2026 employee limit | Catch-up |
|---|---|---|
| 401(k) / 403(b) / 457 / TSP | $24,500 | $8,000 at 50+; $11,250 at ages 60–63 |
| HSA — self-only coverage | $4,400 | $1,000 at 55+ |
| HSA — family coverage | $8,750 | $1,000 at 55+ |
| Health FSA | $3,400 | — |
| Dependent care FSA | $7,500 | — |
| IRA (not payroll) | $7,500 | $1,100 at 50+ |
Sources: IRS IR-2025-111 (retirement plans) and the 2026 health benefit limits. The dependent care FSA limit rose to $7,500 for 2026 — its first increase since 1986.
This is the part that gets glossed over. A traditional 401(k) deferral escapes federal and (usually) state income tax, but it does not escape Social Security and Medicare. An HSA or FSA funded through your employer's cafeteria plan escapes all three.
| Federal income tax | Social Security & Medicare | Taxed on withdrawal? | |
|---|---|---|---|
| Traditional 401(k) | Avoided | Still owed | Yes, as ordinary income |
| Roth 401(k) | Still owed | Still owed | No, if qualified |
| HSA (payroll) | Avoided | Avoided | No, for medical costs |
| Health FSA | Avoided | Avoided | No, for medical costs |
| Dependent care FSA | Avoided | Avoided | No, for qualifying care |
The HSA is the only account in American tax law that is untaxed going in, untaxed while it grows, and untaxed coming out — provided the money eventually pays for qualified medical expenses. That is why it is worth funding even if you never touch it for years.
Single filer, $95,000 salary, standard deduction, no state income tax, 2026 rates.
| Scenario | Federal income tax | FICA | Total federal |
|---|---|---|---|
| No pre-tax contributions | $12,070 | $7,268 | $19,338 |
| $10,000 into traditional 401(k) | $9,870 | $7,268 | $17,138 |
| Plus $4,400 into an HSA | $8,902 | $6,931 | $15,833 |
FICA is unchanged by the 401(k) deferral and falls with the HSA contribution — that is the whole story in one table.
The 401(k) deferral saves $2,200, exactly 22% of $10,000 — this filer's marginal rate. The HSA contribution saves $1,305 on $4,400, an effective 29.65%, because it dodges the 7.65% payroll tax as well. Dollar for dollar, the HSA is the more efficient shelter; it is simply capped much lower.
401(k): the money is locked until 59½ in most cases, and withdrawals are ordinary income later. If you expect a higher tax rate in retirement than today, the Roth version may win despite giving up the deduction now.
HSA: requires a high-deductible health plan — in 2026, a deductible of at least $1,700 (self-only) or $3,400 (family), with out-of-pocket maximums of $8,500 and $17,000. A high deductible is a real cost if you use a lot of care.
FSA: use-it-or-lose-it. Plans may allow a carryover of up to $680 into 2027 or a grace period, but not both, and many allow neither. Estimate low. Unlike an HSA, the full annual election is available on day one of the plan year.
Traditional 401(k) deferrals reduce Box 1 but not Boxes 3 and 5, and appear with code D in Box 12. HSA contributions through payroll appear with code W and reduce all three boxes. If you have ever wondered why Box 1 and Box 3 differ on your W-2, this is usually why — the W-2 walkthrough covers the rest.
The take-home pay calculator has a pre-tax contribution field, so you can watch net pay move as you change the number. Marginal vs. effective rate explains why your marginal rate is the one that sets the size of the saving.