Pre-Tax vs. Post-Tax Deductions: Complete List
Common paycheck deductions categorized as pre-tax or post-tax
| Deduction Type | Pre-Tax or Post-Tax? | Tax Savings |
|---|---|---|
| Traditional 401(k) / 403(b) contributions | Pre-tax | Reduces federal and state income tax (not FICA) |
| Health insurance premiums (employer plan) | Pre-tax (Section 125) | Reduces federal, state, AND FICA taxes |
| Dental and vision insurance | Pre-tax (Section 125) | Reduces federal, state, AND FICA taxes |
| Health Savings Account (HSA) | Pre-tax | Reduces federal, state, AND FICA taxes |
| Flexible Spending Account (FSA) | Pre-tax | Reduces federal, state, AND FICA taxes |
| Dependent Care FSA | Pre-tax | Reduces federal, state, AND FICA taxes |
| Commuter benefits (transit, parking) | Pre-tax (up to limits) | Reduces federal and state income tax |
| Roth 401(k) contributions | Post-tax | No immediate tax savings (but tax-free in retirement) |
| After-tax life insurance (above $50K) | Post-tax | None |
| Wage garnishments | Post-tax | None |
| Union dues | Post-tax (unless employer plan) | May be deductible on Schedule A if itemizing |
Health insurance premiums through an employer’s Section 125 plan are pre-tax — reducing FICA taxes in addition to income taxes. On a $400/month health insurance premium at 22% income tax + 7.65% FICA: total tax savings = $126.60/month ($1,519/year). The FICA savings alone is $30.60/month.
The Section 125 Cafeteria Plan
Many employer benefit deductions are administered under a Section 125 'cafeteria plan,' which makes health insurance premiums, HSA, FSA, and dependent care FSA contributions pre-tax for federal income tax AND FICA purposes. This is more valuable than a typical pre-tax deduction (like 401k) because it also reduces Social Security and Medicare tax — saving an additional 7.65% (employee share) on the deduction amount.
How Pre-Tax Deductions Affect Your Paycheck
- Each dollar of pre-tax deduction reduces federal taxable income → saves approximately $0.22 at 22% bracket
- Health insurance as pre-tax (Section 125) also reduces FICA → saves additional $0.0765 per dollar
- Roth 401(k) as post-tax does NOT reduce any current taxes → same gross pay, same taxes
- Example: $500/month 401(k) pre-tax at 22% bracket saves $110/month in federal tax → your net pay decreases by only $390, not $500
- Pre-tax deductions are automatically more cost-effective for high-bracket workers (saves more per dollar)
See How Pre-Tax Deductions Reduce Your Tax Burden
Enter your pre-tax benefit contributions to see how they reduce your federal and state taxes on each paycheck.