Be sure to check pre-tax deductions before adjusting your payroll.
There are a number of deductions you may be able to benefit from.
Nine states do not have to pay income tax- Which ones?
What are pre-tax deductions?
A pre-tax deduction is money taken from your gross paycheck before withholding taxes. Pre-tax deductions reduce your required contributions to Medicare and Social Security. Read more about it here.
Some pre-tax deductions include:
- Healthcare Insurance
- Health Savings Accounts
- Supplemental Insurance Coverage
- Short-Term Disability
- Long-Term Disability
- Dental Insurance
- Child Care Expenses
- Medical Expenses and Flexible Spending Accounts
- Life Insurance
- Commuter Benefits
- Retirement Funds
- Tax-Deferred Investments
- Vision Benefits
- Parking Permits
Does this benefit me?
There are two types of pre-tax deductions:
- involuntary or mandatory: taxes wage garnishments, fines
- voluntary deductions: the amount you chose to subtract from your gross pay usually for healthcare costs, childcare costs, or retirement fund
These deductions do offer some additional benefit for both you and your employer.
You’ll save money on health coverage which could give you the opportunity to afford a better plan. Keep in mind that there is typically a limit on the number of contributions you can make in a year. Regulations change annually, so be sure to stay up to date if this impacts you.
IRS: What is a W-4 and how will it help my income tax in 2023?
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