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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 |
| Employee Expenses | |
| 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 |
| Annual Pay |
$55,000 |
$55,000 |
$50,000 |
| Total Medical and Dental Premiums |
8,574 |
8,574 |
0 |
| Medical and Dependent Care FSA |
3,500 |
0 |
0 |
| Commuter Reimbursement |
1,008 |
0 |
0 |
| Taxable Income |
41,918 |
46,426 |
55,000 |
|
Federal Income Tax |
10,480 |
11,607 |
13,750 |
| Social Security Tax |
3,206 |
3,552 |
4,208 |
|
After-tax Expense |
0 |
4,508 |
13,082 |
| Take-Home Pay |
28,232 |
26,759 |
23,960 |
| 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.
