The HR Dictionary

Pre-Tax Deduction

Pre-tax deductions are sums of money taken out of an employee's gross salary before taxes are withheld. This can lead to a decreased tax obligation because it lowers the employee's taxable income. Pre-tax deductions include things like contributions to flexible spending accounts (FSAs), health insurance premiums, and 401(k) retirement plan contributions. Pre-tax deductions can help workers reduce their taxable income, which lowers their tax bill and raises their take-home pay.