How the federal tax simulator works

A useful tax comparison starts with the question you want to answer. For example: how does a $5,000 traditional 401(k) contribution change this year’s modeled federal tax and available cash? Eliowise lets you hold your other assumptions constant, duplicate a scenario, and compare the effect of that one change. Every amount you enter is annual and expressed in U.S. dollars.

Start with the right assumptions

1. Choose the tax year and filing status. This loads that combination’s brackets and base standard deduction.
2. Enter annual salary and bonus, then enter only the eligible pretax benefits and contributions you want to model.
3. Choose the standard deduction, enter an itemized total, or use Auto to select the larger of the two.
4. Duplicate the scenario, change one input, and compare it with the first scenario, which is the baseline.

Changing the tax year or filing status restores the corresponding default brackets and deduction. You can edit them for a hypothetical projection, but edited values should not be read as official tax rules. The status label tells you when defaults have been changed. Source links are next to the tax settings.

The calculation, step by step

Gross income is salary plus bonus. Modeled pretax deductions are the entered healthcare premiums, traditional employee 401(k) contributions, and HSA contributions. Taxable income is gross income minus those pretax amounts and the selected standard or itemized deduction, with a minimum of zero. The simulator assumes the amounts you enter qualify for the treatment you selected; it does not determine eligibility.

The simulator then applies each ordinary-income rate only to the taxable income inside that bracket. For each bracket, it takes the smaller of taxable income or the next bracket threshold, subtracts the current threshold, and multiplies any positive remainder by the rate. The bracket amounts are added to produce federal income tax before credits. A higher marginal bracket does not apply to every dollar you earn.

The effective rate shown is modeled federal income tax divided by salary plus bonus, not divided by taxable income. Results display rounded dollars, while the calculation uses unrounded numbers. Actual tax-return table methods and rounding can produce differences even for otherwise similar inputs.

Worked example: a single filer earning $60,000 in 2026

Assume $60,000 of salary, no bonus, no pretax contributions, and the $16,100 base standard deduction. Taxable income is $43,900. Using the IRS 2026 brackets and deduction, the model taxes the first $12,400 at 10% ($1,240) and the remaining $31,500 at 12% ($3,780). Total federal income tax before credits is $5,020, about 8.4% of the original salary.

Modeled cash is $60,000 minus $5,020, or $54,980. This is cash before payroll taxes and state or local taxes; it is not a prediction of deposited pay. The calculator has no withholding input, so this result cannot tell you whether you will receive a refund or owe a balance when filing.

Compare a $5,000 traditional contribution with Roth

Keeping the example above, a qualifying $5,000 traditional employee 401(k) contribution reduces modeled taxable income to $38,900. The first $12,400 still produces $1,240 of tax; the remaining $26,500 produces $3,180. Total modeled tax falls to $4,420, a $600 reduction. Modeled cash becomes $50,580, and $5,000 has moved into retirement savings. The immediate cash cost is $4,400 because of the modeled federal tax reduction.

Entering the same $5,000 as Roth instead leaves taxable income at $43,900 and modeled tax at $5,020. Modeled cash becomes $49,980, with $5,000 counted toward retirement contributions. This comparison describes only the current-year model. It does not determine which option is better over your lifetime, forecast account growth, or calculate future withdrawal taxes.

Read the comparison metrics correctly

• Total Comp: salary plus bonus plus the entered employer 401(k) match. Other benefits are excluded.
• Net Take-Home: salary plus bonus, less modeled pretax benefits, employee Roth contributions, and federal income tax. Payroll and state taxes are excluded.
• Federal Tax: ordinary federal income tax from the model, before credits.
• Net Gain: modeled cash plus employee and employer 401(k) contributions and HSA contributions. It combines cash and account contributions; it is not investment profit or an after-tax account value.
• Delta vs Baseline: the difference in that combined cash-and-contributions metric from your first scenario.

Pretax healthcare premiums reduce cash but are not added back to Net Gain. Employer matching contributions are added to Total Comp and the contributions metric, not to taxable salary. Vesting, employer match caps, and future account taxes are outside the model. Dollar outputs are floored at zero, so scenarios where deductions exceed income should not be interpreted as realistic cash-flow projections.

What the simulator does not calculate

The model excludes Social Security and Medicare taxes, additional Medicare tax, state and local taxes, self-employment tax, alternative minimum tax, net investment income tax, and tax credits. It does not calculate withholding, estimated payments, refunds, or a final tax-return balance. It also does not separately model capital gains, qualified dividends, business income, Social Security benefits, or other income categories with their own rules.

The standard deduction is the base amount only. Age, blindness, dependent status, special deductions, and eligibility restrictions are not applied. Itemized amounts are accepted as entered without enforcing SALT caps, mortgage-interest rules, charitable limits, or other restrictions. Auto merely chooses the larger entered deduction; it does not determine whether itemizing is permitted for your circumstances.

Retirement and HSA contribution caps, catch-up rules, income phaseouts, coverage eligibility, and employer-plan restrictions are not enforced. Historical years use year-specific brackets and base deductions, not a complete reconstruction of every tax law for that year. A future year marked projected uses the linked estimates, which may differ from final IRS figures or later legislation.

Check the result before making a decision

Review the applicable Form 1040 instructions and IRS 401(k) guidance for rules that the simulator does not cover. For paycheck withholding, use the IRS Tax Withholding Estimator. Consult a qualified CPA, enrolled agent, or tax attorney for your situation. Report a suspected model error to support@eliowise.com using a fictional example.