Pretax Deductions for the US

Pretax deductions are deductions made from a person's gross income. They reduce the total taxable income of the person and the tax withheld.

When working with pretax deductions, consider the following.

• How wage basis rules work with them

• What are their contribution limits

For further info, see Define Pretax Deduction Elements for the US in the Help Center.

Wage Basis Rules

Use wage basis rules to determine how pretax deductions reduce gross wages. A reduction in gross wages results in a reduction of taxable income, thereby allowing a reduction of some taxes and involuntary deductions.

For example, Pretax Healthcare 125 deductions are exempt from medicare and social security taxes. However, 401(k) deductions reduce taxable wages for federal income tax (FIT) only and not for social security and Medicare. In most cases you use the predefined rules and don't need to do anything.

For further info, see Tax Wage Basis Rules for the US in the Help Center.

Contribution Limits

The predefined contribution limits help ensure the employee is in compliance with statutory limits. However, there are some cases where you need to adjust the limits for individual employees.

For further info, see Contribution Limits for Deferred Compensation Plans in the Help Center.