|
|
What are pre-tax dollars?
Pre-tax dollars lowers your gross income before the calculation of income taxes (Federal, State, and most local income taxes), as well as FICA and Medicare taxes.
Back to top
How do I save money?
Each paycheck the pre-tax deductions lowers the gross wages so you pay less payroll taxes.
Then when you get your W-2 and the end of the year, your reportable income will be lower by deducted with pre-tax dollars. This is a permanent tax break each year. On your Income Tax, Form 1040 Line 7 “wages, tips, etc.” will be lower. So, in effect you are getting a deduction on your income tax return.
Back to top
Since FICA and Medicare (Social Security taxes) are reduced, won't my Social Security be affected?
If you are earing over $106,800 in 2009, only your 1.45% Medicare contributions will be lower but these will not affect your benefits. Or if you will be eligible for your spouse’s Social Security benefits, you will not be affected. Otherwise, since you will be paying less FICA, the government provided benefits may be slightly lower when you retire if your gross income less the annual elections is $106,800 or less in 2008 (thus reducing your 7.65% FICA contributions).
For most employees, the impact to Social Security benefits is not very significant because these benefits are based on average earnings over your working years. Furthermore, the interest rate credited on earnings is less than that which you can earn in retirement plans and IRAs. If you are still concerned about funding your retirement, then please contact us to inquire about your specific situation,.
Back to top
|
©2005
BSI Administrative Services. All Right Reserved.
|
|
|
