Pre-tax vs post-tax deductions
401(k) lowers income tax but not Social Security or Medicare. Section 125 health, dental, vision, HSA and FSA lower all of them. After-tax deductions change nothing.
Use Add deductions on the Earnings step. Each preset knows how it is taxed, and a small note under the row tells you.
| Deduction | Type | Federal and state income tax | Social Security and Medicare |
|---|---|---|---|
| 401(k) % | Pre-tax (retirement) | Lowered | Not lowered |
| Health, dental, vision, HSA, FSA | Pre-tax (Section 125) | Lowered | Lowered |
| Roth 401(k) %, garnishment, union dues, custom | After tax | Not lowered | Not lowered |
401(k) and Roth 401(k) are a percentage of gross pay; you can change the percentage under the row. The others are a fixed amount you type.
Example
$2,000.00 bi-weekly in Texas, single, with a 5% 401(k) ($100.00) and $50.00 health insurance:
| Row | No deductions | With 401(k) and health |
|---|---|---|
| Federal tax | $156.15 | $138.15 (taxed on $1,850.00) |
| Social Security | $124.00 | $120.90 (taxed on $1,950.00) |
| Medicare | $29.00 | $28.28 |
| 401(k) | $100.00 | |
| Medical | $50.00 | |
| Net pay | $1,690.85 | $1,562.67 |
Social Security and Medicare are still worked out on the full $2,000.00 minus the health insurance, because 401(k) money is taxed for FICA.
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