Does A 401K Contribution Reduce AGI? 
Pre tax payroll contributions used to fund your 401K reduce the amount of income reported on your W2 . Your Adjusted Gross Income -LRB- AGI -RRB- is your gross income minus adjustments . Since pre tax elections reduce reported income , it also reduces AGI . Your AGI is used to determine the amount of qualified medical expenses you can deduct , and may apply to other tax trigger amounts . 