Over 50 and Earned Over $150,000? Your 401(k) Catch-Up Tax Break Changed in 2026

Higher-earning workers over 50 lost a familiar tax break on their 401(k) catch-up contributions in 2026. Starting this year, those who earned more than $150,000 from their employer in 2025 generally must make catch-up contributions on a Roth, after-tax basis rather than pretax, which means no upfront tax deduction on that money.

What Actually Changed

Catch-up contributions are the extra amounts workers 50 and older can add to a 401(k) beyond the standard limit. For years, savers could make them pretax, lowering that year’s taxable income. Under a SECURE 2.0 provision that took effect January 1, 2026, employees whose prior-year wages from that employer topped $150,000 must now direct those catch-up dollars into a Roth account instead.

Who Crosses the $150,000 Line

The threshold is based on Social Security wages, the amount in Box 3 of the prior year’s W-2, from the same employer, not total household income. It is measured per employer, so someone who changed jobs may be treated differently. Workers below the $150,000 line can still choose pretax catch-up contributions as before.

Pretax Now, or Tax-Free Later

Losing the upfront deduction is a real change, but it is not all one-directional. Roth catch-up contributions are made with after-tax dollars, so qualified withdrawals in retirement come out tax-free. The trade is a higher tax bill this year in exchange for no tax on that money and its growth later, a shift in timing rather than a simple loss.

What to Check Before Year-End

Affected workers should confirm two things with their plan: whether it offers a Roth option, and how it is applying the new rule for 2026. Plans are following the requirement this year under good-faith guidance, with the final regulations mandatory in 2027. Anyone near the $150,000 line who counts on the pretax deduction will want to know where they stand before their last paychecks of the year.

References: Newfront | IRS