What is a Pre-tax contribution?
A pre-tax contribution is money deducted from an employee's gross pay before federal, state, and local income taxes are calculated, thereby reducing the employee's taxable income and overall tax liability. These contributions are commonly used for retirement plans, health savings accounts, flexible spending accounts, and certain insurance premiums. Pre-tax contributions also reduce Social Security and Medicare taxes for both employees and employers. The Traditional 401k strategy maximizes pre-tax contribution benefits for retirement planning. While pre-tax contributions provide immediate tax savings, withdrawals from retirement accounts are typically taxed as ordinary income.
Easily save clients thousands in taxes.
Scan client returns.
Uncover savings.
Export a professional tax plan.
.png){kind=small}