Pre-Tax Payroll Deductions
Payroll deductions for medical and dental coverage may be deducted under the provisions of the Internal Revenue Service Tax Code, Section 125. The County’s Cafeteria Plan/Section 125 allows you to make these premium payments from pre-tax dollars.
Each year during Annual Enrollment, you are given the opportunity to elect Pre-Tax or Post-Tax medical and dental premiums. If you select Pre-Tax, the money you spend on premiums will not be subject to federal income or Social Security taxes, and these savings will show up in your take home pay. See the example below in which an employee saves $27.69 per paycheck by electing Pre-Tax payroll deductions.
Example
Employee is married, has family medical and dental coverage and has claimed one exemption for income tax.
Post-Tax Medical and Dental Deductions
| Item | Biweekly Gross Pay (Taxable Income) $1,000 | Biweekly Gross Pay (Taxable Income) $1,500 | Biweekly Gross Pay (Taxable Income) $2,000 |
|---|---|---|---|
| Deduction for Medical & Dental | -122.32 | -122.32 | -122.32 |
| Federal Income Tax | -72.40 | -147.40 | -222.40 |
| Social Security Tax | -62.00 | -93.00 | -124.00 |
| Medicare Tax | -14.50 | -21.75 | -29.00 |
| Net Biweekly Take Home Pay | $728.78 | $1,115.53 | $1,502.28 |
Pre-Tax Medical and Dental Deductions
| Item | Biweekly Gross Pay $1,000 | Biweekly Gross Pay $1,500 | Biweekly Gross Pay $2,000 |
|---|---|---|---|
| Pre-Tax Deduction for Medical & Dental | -122.32 | -122.32 | -122.32 |
| Taxable Income | $877.68 | $1,377.68 | $1,877.68 |
| Federal Income Tax | -54.06 | -129.06 | -204.06 |
| Social Security Tax | -54.42 | -85.42 | -116.42 |
| Medicare Tax | -12.73 | -19.98 | -27.23 |
| Net Biweekly Take Home Pay | $756.47 | $1,143.22 | $1,529.97 |
- Pre-Tax premium deductions mean more money in your take home pay.
- However, keep in mind that since your Social Security wage is reduced, your Social Security benefit at retirement will reflect this very slight decrease in wages. Your other benefits such as the Florida Retirement System benefits and group life insurance coverage are not affected.
- The Internal Revenue Service allows you to make changes to your Pre-Tax/Post-Tax selections only during Annual Enrollment in the fall unless you experience a qualifying event during the year such as getting married.