Do 403(b) Contributions Reduce Your AGI?
Yes, if it is a traditional (pre-tax) 403(b). It works exactly like a traditional 401(k). A Roth 403(b) does not reduce your AGI. Here is the difference.
Traditional 403(b): yes, reduces AGI
A 403(b) is a retirement plan for employees of public schools, colleges, hospitals, and certain nonprofits, functionally the nonprofit-sector equivalent of a 401(k). When you contribute to a traditional 403(b), your employer deducts the contribution from your paycheck before calculating your taxable wages for the year. That contribution never shows up in Box 1 of your W-2 as taxable income, which means it reduces your adjusted gross income dollar for dollar, the same as a traditional 401(k) or traditional IRA contribution.
Roth 403(b): no, does not reduce AGI
A Roth 403(b) works the opposite way. Contributions are made with money that has already been taxed, so they do not reduce your current-year AGI at all. The benefit of a Roth account is that qualified withdrawals in retirement are tax free, not an upfront AGI reduction. If your goal this year is to lower your AGI, only the traditional side of a 403(b) helps.
2026 contribution limits
| Contribution type | 2026 limit |
|---|---|
| Employee elective deferral (under 50) | $24,500 |
| Employee elective deferral (50 and older) | $32,250 (includes $7,750 catch-up) |
| 15-year service catch-up (some employers) | Up to an additional $3,000 |
These limits are shared across 401(k) and 403(b) plans. If you contribute to both types of plan in the same year across different jobs, your combined traditional and Roth contributions cannot exceed the overall limit.
A worked example
A hospital worker with a $95,000 salary contributes $12,000 to a traditional 403(b) during 2026. Their W-2 shows $83,000 in Box 1 wages, not $95,000, because the traditional contribution came out before tax. Their AGI for the year reflects that lower $83,000 figure (before any other adjustments), which can help them stay under AGI-based thresholds for things like IRA deduction eligibility or the Child Tax Credit phase-out. If they had contributed the same $12,000 to a Roth 403(b) instead, their W-2 Box 1 wages and AGI would still show the full $95,000.
Why this matters beyond just this year's tax bill
Because AGI (and MAGI) controls so many other thresholds, a traditional 403(b) contribution can do double duty: it lowers this year's taxable income and it can preserve eligibility for AGI-based benefits like the Child Tax Credit, IRA deduction eligibility, and the phase-outs on the new tips, overtime, and senior deductions. See the full list of moves that reduce AGI and read why below-the-line deductions do not do the same thing.
Frequently asked questions
Do 403(b) contributions reduce AGI?
Yes, for traditional (pre-tax) 403(b) contributions. They reduce your AGI dollar for dollar, the same way a traditional 401(k) does. Roth 403(b) contributions do not reduce AGI.
What is the difference between a 403(b) and a 401(k) for tax purposes?
Functionally very little. A 403(b) is offered by public schools, nonprofits, and certain other tax-exempt employers, while a 401(k) is offered by for-profit employers. Both have the same contribution limits and both reduce AGI when contributions are traditional (pre-tax).
How much can I contribute to a 403(b) in 2026?
$24,500 if you are under 50, or $32,250 if you are 50 or older, including the catch-up contribution. Some long-tenured employees may qualify for an additional 15-year service catch-up.
Should I choose traditional or Roth for my 403(b)?
If lowering your current AGI matters, such as staying under a phase-out threshold, traditional contributions help and Roth contributions do not. If you expect to be in a higher tax bracket in retirement, Roth may be worth the tradeoff despite not reducing AGI now. This is a personal finance decision, not tax advice.