Before-Tax Deduction

What is a Before-Tax Deduction?

Before-tax deductions are a type of payroll deduction taken from an employee's salary for specific purposes. Deductions and withholding include federal income tax, benefits contributions, and garnishments.These deductions specifically refer to contributions that are deducted from an employee's paycheck before taxes are withheld.

While all pre-tax deductions are considered payroll deductions, not all payroll deductions are taken out before taxes. Regardless of when they are withheld, deductions decrease an employee’s take-home pay, so it affects the amount an employee will see on their paystub.

To learn more about before-tax deductions, see pre-tax deduction.