Do any of the following apply to you?
- Would you like to increase your take home pay?
- Anxious about being able to afford your out of pocket medical costs?
- Would you like to save on medical expenses?
- Would you like to save on dependent care expenses?
If you answered yes to any of these questions, taking advantage of the Pre-Tax benefits offered at UNI could help you save money and increase your take home pay.
How do you maximize your savings?
The University offers options to benefits eligible employees to offset health, dental, vision, and dependent day care expenses.
Let's take a look at what Pre-Tax Deductions are:
A deduction from your salary prior to any tax deductions is called a Pre-Tax deduction. These deductions reduce your overall annual taxable income, resulting in more take home pay!
Higher Income = Higher Taxes
Lower Taxes = Higher Savings
Let's review the Pre-Tax Deductions available to you at UNI:
- Health and Dental Pre-Tax Deduction
Your medical and dental premiums are deducted on a Pre-Tax basis. This may help increase your take home pay, decrease your taxable income, and save you more money.
- Flexible Spending Accounts (FSA)
You may sign up for account(s) to help reduce your medical and/or dependent care costs. These accounts are called Flexible Spending Accounts (FSA). By enrolling in a Health Care FSA you are using Pre-Tax money to help pay qualified health expenses. By enrolling in a Dependent Care FSA you are using Pre-Tax money to help pay dependent care expenses for a child or qualified dependent.
These deductions, like the Health and Dental Pre-Tax Deduction, are tax free. They will reduce your taxable income allowing you to save on income taxes. Reimbursements from your FSA account(s) used to pay for qualified expenses are also tax free!
Now let's decide how much you will need for your FSA account.
One way to determine your Health Care FSA needs is to log into your Wellmark account and review your out-of-pocket expenses for the last 3 years. Use the average to determine how much you may need for the upcoming year. If you know you will have a major medical expense in the upcoming year account for that in your calculation.
One way to determine your Dependent Care FSA needs is to gather your daycare and other day-to-day care out of pocket expenses for the previous 3 years and use an average to determine how much you may need for the upcoming year.
How Do Pre-Tax Deductions Benefit You?
Pre-Tax deductions are deductions from your paycheck prior to any taxes being withheld, meaning more money in your pocket and less money paid in taxes.
|Description||With After-Tax Deductions||With Pre-Tax Deductions|
|= $2,000.00||= $1,880.00|
|Tax Obligation (above amount multiplied by 25.0%)||-$500.00||-$470.00|
|Your Take-Home Pay||= $1,380.00||= $1,410.00|
|Description||Without Healthcare FSA Deduction||With Healthcare FSA Deduction|
|Your Annual Pay||$45,000.00||$45,000.00|
|Pre-Tax Annual FSA Amount||-$0.00||-$1,000.00|
|Pre-Tax Annual Deductions Health and Dental||-$2,923.20||-$2,923.20|
|= $42,076.80||= $41,076.80|
|Tax Obligation (above amount multiplied by 25.0%)||- $10,519.20||- $10,269.20|
|= $31,557.60||= $30,807.60|
|After-Tax Dollars Spent on Eligible Expenses||- $1,000.00||- $0.00|
|Your Annual Take-Home Pay||= $30,557.60||= $30,807.60|
Look at all the ways you save!
Annual taxable income is $41,076.80 compared to $42,076.80, your annual taxable income fell by $1,000.00.
After taxes have been deducted your take home pay is $30,807.60 using your Pre-Tax options, resulting in an annual increase in take home pay of $250.00 or $20.83 per month!
Since the FSA amount of $1,000 is Pre-Tax, in this example, you would only see a reduction of $750.00 from your annual income. That means you have an account worth $1,000 that you only paid $750.00 to have established.
Close to Retirement?
Social Security benefits plays a large role in the retirement planning. Using the Social Security Administration's Retirement Estimator is a great way to help you understand your estimated retirement benefit. When you are close to retiring, understanding your estimated retirement benefit can help you decide if utilizing Pre-Tax Deductions is right for you.
Let's begin your deductions!
Flexible Spending Accounts
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