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This is essential for making informed decisions about benefits, savings and overallfinancial planning.
Its important to understand pre-tax and post-tax deductions because they affectwhere paycheck funds go, including take-home pay.
The amount deducted depends on the employees contribution rate and whether the employer matches contributions.
Employees can use these accounts to save money for qualified medical expenses.
Dependent Care Benefits
Employees can save money foreligible dependent care expensesincluding after-school programs and childcare.
Employees must meet specific qualifications to be eligible fordependent care benefits.
The employers policy will determine the amount to be deducted before taxes for the employees contribution to this benefit.
Here are some that appear on paychecks.
These include life insurance, disability insurance and other voluntary plans.
Roth IRAs (individual retirement accounts) are a pop in of retirement contribution that require a post-tax deduction.
This allows the employee to be able to receive tax-free withdrawals during retirement.
Child Support and Alimony Deductions
Court-ordered payments to dependents or ex-spouses are considered post-tax wage garnishments.
The Office of Child Support Enforcement uses state-specific regulations to ensure compliance.
An employees income can have its deductions capped at 50% to 65%.
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