Tax Free Advantage
Your share of the cost of medical coverage and dental coverage is withheld from your paycheck with pre-tax dollars before federal, state and social security taxes are taken out. Your contributions to the Flexible Spending and Commuter Reimbursement Accounts are also made on a tax-free basis.
Here is an example to show how pre-tax contributions and enrolling in a Flexible Spending and Commuter Reimbursement Account can help you save on taxes.
Let us assume the following:
|Employee Elections||Annual Employee Cost *|
|Medical/Vision 90/70 Plan, Family||$6,924.00|
|Delta PPO, Family||1,650.00|
|Total Medical and Dental Premiums||$8,574.00|
|Annual Medical Expenses||2,000.00|
|Annual Child Care Expenses||1,500.00|
|Annual Metro Card Expenses||1008.00|
|Total Yearly Contributions||$4,508.00|
|Annual Salary: $55,000||Tax Bracket*: 25%|
|Tax-Free With FSA||Tax Free Without FSA||After-Tax|
|Total Medical and Dental Premiums||8,574||8,574||0|
|Medical and Dependent Care FSA||3,500||0||0|
|Federal Income Tax||10,480||11,607||13,750|
|Social Security Tax||3,206||3,552||4,208|
|Tax Free Savings from FSA||$1,473|
|Total Tax Free Savings||$4,272|
* Based upon Medical plan and dental plan premium rates effective July 1, 2008.
** If state taxes were included in this example, your tax savings would be even greater.