Q&A of the Week August 10, 2022

Question

What are pretax deductions?

Answer

Pretax deductions are generally employee contributions to employer-sponsored benefits. These may include group health insurance, group term life insurance, 401(k), Roth IRA, 403 (b), and Government Thrift Savings Plans.

Pretax deductions are taken from an employee's paycheck before taxes are withheld. This is beneficial because they lower the employee's taxable income and the amount of money the employee owes to the government.