pre-tax, tax-exempt, tax free
What does it mean to have health insurance premiums or to use HSA & FSA contributions deducted pre-tax to pay for health care expenses?
Simple, you and your employer pay less taxes which means more money in your paycheck! The pre-tax amounts are subtracted from your gross pay, then the taxes are calculated.
For example, if you are paid on a weekly basis claiming zero exemptions with a health insurance deduction and HSA or FSA deductions totaling $100 per week, your take home pay would look like this:
| Single after tax: | Single Pre-tax: | |||||||||||||||||||||
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| Total net pay = $620.12 | Total Net Pay $658.77 |
In this example, you would save $2,009.80 per year! (658.77 – 620.12)
x 52 weeks
Employers in this example would save the 7.65% Social Security/Medicare match
which would = $397.80. ($100 per week x 52 weeks x 7.65%)
If you would like to calculate your exact savings based on your wages
and health care expenses, visit http://www.state.vt.us/tax/pdf.word.excel/business/2010wh-charts.pdf to calculate Vermont withholding tax and http://www.irs.gov/pub/irs-pdf/n1036.pdf (use Pub 15-A wage Bracket Combined WH (TY 2010) web.xls) to calculate Federal
taxes.
