moneyI recently received my W-2 form from my employer and it held a bit of nice news. Working in concert with my employer I managed to shield about $3,000 of my income from being taxed. Through various changes in the tax code made during the Bush administration, we can now have a number of different payouts made with pretax dollars. My employer puts these savings under a heading called a "cafeteria plan." Here's how it helped me to reduce my tax bill.

My employer takes the deduction for my health insurance premium pretax. That's $49 per week untaxed. My employer-provided life insurance premium is paid pretax. That's another $4 untaxed. My company-sponsored IRA account gets $5 per week untaxed, as well as the untaxed contributions which my employer makes to my IRA, out of the goodness of their hearts.

There are other payments which you can make with pretax dollars also. Consult with your employer to see if they enable these types of benefits. As far as I know, the law doesn't require employers to provide these options but many employers do because they can improve workforce morale. It might also be advisable to consult with a tax preparation professional regarding the long term effects and conditions of these types of benefits. Pretax deposits to IRA accounts can later become taxable if you access them before you reach certain age thresholds.

Increase your money and finance knowledge from home

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

TurboTax Articles

The Home Office Deduction

Many people whose small businesses qualify them for a home office deduction are afraid to take it because they've heard it will trigger an audit. But if you deserve it, take advantage. These tips can help you determine if you qualify and rest easy when you do.

Taxes and Reducing Debt

By allowing deductions for certain kinds of interest, Congress is happy to help subsidize your debt. Be sure to accept these invitations to save yourself money.

Top 10 Oddball Tax Deductions

TurboTax helps you find every deduction and credit you deserve to help you get your maximum tax refund. But just for fun, we've uncovered what we think are the weirdest deductions allowed, from pet food to free beer to (we're not kidding) a girlfriend.

IRS Publications

The IRS wants you to file your tax return. That's why it has guides to help you with nearly every tax situation. Find the IRS publication that covers your particular situation.

Taxes and Moving to a New State

If you are considering moving to another state, you might want to consider states that do not have state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Before you move, learn more about other income tax considerations, such as how your current state of residence would tax your retirement income.

Add a Comment

*0 / 3000 Character Maximum