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July 13, 2023 - 2 min read

Post-tax Deductions

Being aware of post-tax deductions helps you to make informed decisions when managing personal expenses and optimize your financial situation. Read on to find out what post-tax deductions are and how they work.

What are post-tax deductions?

Post-tax deductions, or after-tax deductions, are expenses and contributions subtracted from an employee’s income after payroll taxes have been withheld. Unlike pre-tax deductions, which reduce the taxable income and, in turn, lower the amount of tax an employee owes, post-tax deductions are applied after taxes have already been calculated.

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Types of post-tax deductions

A number of post-tax deductions exist, see the most common below.

Garnishments

Garnishments are non-voluntary post-tax deductions required by court order to be withheld by the employer from an employee’s earnings for the payment of an unpaid debt such as student loans or child support.

Retirement contributions

One of the most popular forms of post-tax deductions is contributing to retirement savings plans, such as a Roth IRA or Roth 401(k). While these contributions don't provide immediate tax benefits, they offer the benefit of tax-free withdrawals in the future, provided you meet certain conditions. By saving post-tax dollars towards retirement, you can enjoy tax-free growth on your investment earnings.

Health insurance premiums

If you pay your health insurance premiums directly, rather than through your employer's pre-tax plan, these payments are considered post-tax deductions. While they do not reduce your taxable income, they are still valuable as they enable you to maintain health coverage.

Union dues

Union membership is typically voluntary. Union dues are seen as personal expenses rather than mandatory payments or employer-sponsored benefits. As such, they are treated as post-tax deductions since they are not directly related to the employer's payroll.

Schedule A deductions

Medical expenses

When medical expenses exceed a certain threshold, you may be able to deduct them as itemized deductions on your tax return. However, note that the threshold for deductibility is typically quite high, and you can only deduct the amount of medical expenses that exceed a specific percentage of your adjusted gross income (AGI).

Charitable donations

When you make charitable contributions, whether in cash or non-cash items, these donations are generally deductible on your tax return. However, to claim a deduction, you must itemize your deductions on Schedule A of your tax return. Since these deductions are subtracted from your income after taxes, they qualify as post-tax deductions.

Interest and taxes

Some personal expenses, such as state and local income taxes, mortgage interest, and property taxes, can be deducted on your tax return as itemized deductions.

FAQ

You may receive post-tax deductions on your paycheck for various reasons. Common ones include contributions to retirement savings plans, such as Roth IRAs or Roth 401(k)s, which are funded with post-tax dollars. Other post-tax deductions can include payments for health insurance premiums made outside of an employer's pre-tax plan.
Post-tax deductions on a paycheck refer to specific deductions that are subtracted from your income after taxes have been withheld. These deductions may include retirement contributions made with post-tax dollars, health insurance premiums paid outside of pre-tax plans, or deductions for personal expenses.

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