Simulation

What a Retirement Contribution Saves in Tax

On $90,000 of income, a single filer contributing $10,000 to a traditional 401(k) or IRA cuts federal tax from $10,970 to $8,770 — saving $2,200, which is exactly the 22% marginal rate applied to the full $10,000. Invested at a 7% assumed return for 20 years, $10,000 a year would grow to about $409,955. The chart compares tax with and without the contribution.

Results

Visualization

FiscTalk provides educational estimates only using 2026 IRS federal income-tax brackets as clearly labeled assumptions. This is not tax, legal, or financial advice. Your situation may differ due to credits, state tax, AMT, and other factors. Consult a qualified tax professional before filing.

The short answer

A traditional (pre-tax) contribution reduces taxable income dollar for dollar, so the tax saved is the contribution multiplied by your marginal rate — provided the contribution does not push you down into a lower bracket. At $90,000 single, taxable income falls from $73,900 to $63,900; both sit inside the 22% bracket, so the saving is a clean $10,000 × 22% = $2,200.

The interesting cases are the ones that cross a boundary. If a $20,000 contribution takes you from the 24% bracket into the 22% bracket, the first slice saves 24% and the rest saves 22% — the total is less than the headline rate implies. That is why the calculator recomputes both scenarios rather than multiplying by a single rate.

How the calculation works

Taxable income is gross income minus the standard deduction minus the contribution. For 2026 the standard deduction is $16,100 single and $32,200 married filing jointly (IRS Rev. Proc. 2025-32). The tool then applies the 2026 bracket schedule to that lower base.

The growth figure is a separate, clearly-labelled assumption. Future value treats the annual contribution as an ordinary annuity: FV = C × ((1 + r)ⁿ − 1) / r. At $10,000 per year, 7%, 20 years, that is 10,000 × 40.9955 = $409,955. Three things that number is not: it is not inflation-adjusted, it is not net of fees, and it is not net of the tax you will owe when you withdraw. Traditional balances are taxed as ordinary income on the way out.

What this tool covers — and what it does not

Covers: federal income tax only, for a single filer or a married couple filing jointly, taking the standard deduction.

Does not cover:

State income tax. In a state with an income tax your saving is larger; in a no-tax state it is exactly what you see here.
Payroll taxes — and this is where 401(k) and IRA genuinely differ. A 401(k) elective deferral made through payroll is excluded from Social Security and Medicare wages, so it reduces FICA as well as income tax. An IRA contribution does not: FICA has already been withheld on those wages, and the IRA deduction only reduces income tax on your return. For a W-2 employee, a 401(k) dollar is worth more than an IRA dollar.
Contribution limits. The IRS sets an annual elective deferral limit and an IRA limit, both indexed. This tool does not enforce them — if you enter more than you are allowed to contribute, the tax saving shown is not available to you. Check the current limits before acting.
Employer match, the Saver's Credit, required minimum distributions, and Roth conversions. A match is the highest-return part of most retirement plans and this tool does not model it.

The one thing worth more than the deduction: if your employer matches contributions, contribute at least up to the match before optimising anything else. A 100% match on the first few percent is an immediate return no bracket arithmetic competes with.

2026 federal brackets used

Rate	Single (taxable income)	Married filing jointly
10%	$0 – $12,400	$0 – $24,800
12%	$12,400 – $50,400	$24,800 – $100,800
22%	$50,400 – $105,700	$100,800 – $211,400
24%	$105,700 – $201,775	$211,400 – $403,550
32%	$201,775 – $256,225	$403,550 – $512,450
35%	$256,225 – $640,600	$512,450 – $768,700
37%	over $640,600	over $768,700

Worked examples

Every row below is computed with the same 2026 schedule the tool uses, so you can reproduce any of them by hand:

Case	Tax without	Tax with	Saved	Effective marginal
Single, $60,000 income, $6,000 contribution	$5,020	$4,300	$720	12%
Single, $90,000 income, $10,000 contribution	$10,970	$8,770	$2,200	22%
Joint, $150,000 income, $15,000 contribution	$15,340	$12,040	$3,300	22%
Single, $250,000 income, $20,000 contribution	$51,304	$44,904	$6,400	32%

Notice the third row: a joint filer at $150,000 is still in the 22% bracket, while a single filer needs only $105,700 of taxable income to reach 22%. Two-earner households often get less benefit per dollar contributed than the bracket table suggests at a glance — run your actual filing status rather than assuming.

Decision checklist

Contribute at least enough to capture the full employer match, whatever your bracket.
Work out your marginal rate, not your effective rate — the deduction is worth the marginal rate.
Compare traditional against Roth using your expected retirement rate, not your current one.
Check the current-year contribution limits before assuming the full amount is available.
Re-run it after any raise, job change, or change in filing status: the bracket you land in is what drives the answer.
Remember the tax is deferred, not eliminated — you will owe ordinary income tax on withdrawal.

Frequently asked questions

How much tax do I save per dollar contributed?

Your marginal federal rate — 22% at the $90,000 single example, so about 22 cents per dollar. If the contribution crosses a bracket boundary, the blended saving is lower.

Is the 401(k) saving bigger than the IRA saving?

For a W-2 employee, usually yes. A payroll 401(k) deferral also escapes Social Security and Medicare tax; an IRA contribution reduces income tax only, because FICA was already withheld on those wages.

Is the future value guaranteed?

No. It uses the assumed return you set and is illustrative only. Real returns vary year to year, markets can fall, and the figure is in nominal dollars — not adjusted for inflation or fees.

Why is my effective rate so much lower than my bracket?

Your effective rate is total tax divided by total income; your marginal rate applies only to your last dollar. At $90,000 single the tool shows a 12.2% effective rate while the marginal rate is 22% — the standard deduction and the lower brackets do most of that work.

Does this include state tax?

No, federal only. If you live in a state with an income tax your real saving is larger; if not, it matches what you see here.

Are these 2026 brackets?

Yes — IRS Rev. Proc. 2025-32, with the 2026 standard deduction of $16,100 single and $32,200 joint. Figures as of 2026-08-09.

Sources

IRS Rev. Proc. 2025-32 — 2026 inflation adjustments (brackets, standard deduction). Retrieved 2026-08-09.
IRS Pub. 15 (Circular E), Employer's Tax Guide 2026 — Social Security wage base $184,500. Retrieved 2026-08-09.
IRS Pub. 15-T (2026) — federal income tax withholding methods. Retrieved 2026-08-09.
IRS Schedule A (Form 1040) — itemized deductions. Retrieved 2026-08-09.

Figures as of 2026-08-09. FiscTalk provides educational estimates only. This is not tax, legal, or financial advice — confirm any consequential figure with a licensed CPA, EA, or the IRS publication cited.