Key takeaways
What this article covers, in order:
- Pre-tax deductions and which taxes they skip
- Common post-tax deductions
- How garnishment limits are calculated
- Worked example: one paycheck at a Tampa dental office
- Imputed income: the reverse of a deduction
- Common payroll deduction mistakes
A post-tax deduction is an amount taken from an employee's pay after income tax, Social Security and Medicare have already been calculated on the full wage, so it does not reduce the employee's taxable wages. Roth 401(k) contributions, wage garnishments, union dues and most charitable payroll gifts are typical examples. A pre-tax deduction, by contrast, comes out before some or all of those taxes are figured, which lowers the tax on that paycheck.
The catch is that "pre-tax" is not one thing. A traditional 401(k) contribution skips federal income tax but not Social Security or Medicare, while health premiums through a cafeteria plan usually skip both. Getting each deduction coded correctly in payroll decides what lands in boxes 1, 3 and 5 of every W-2. Limits below are for 2026.
Pre-tax deductions and which taxes they skip
Traditional 401(k) and 403(b) elective deferrals
- Generally exempt from federal income tax withholding.
- Still subject to Social Security, Medicare and FUTA.
- 2026 employee deferral limit: $24,500. Catch-up for age 50 and over: $8,000. A higher catch-up of $11,250 applies at ages 60 to 63.
Health, dental and vision premiums through a section 125 cafeteria plan
- If the employee chooses a nontaxable benefit, the premium is treated as if the benefit were provided outside the plan: exempt from income tax withholding, Social Security, Medicare and FUTA.
- Greater-than-2% S corporation shareholder-employees are an exception and should be handled separately.
Health savings account (HSA) contributions
- Contributions through payroll are exempt from income tax withholding, Social Security, Medicare and FUTA, up to the limits, if the employee is reasonably expected to be able to exclude them.
- 2026 limits: $4,400 for self-only HDHP coverage, $8,750 for family coverage.
Flexible spending arrangements
- Health FSA salary reductions: capped at $3,400 for plan years beginning in 2026.
- Dependent care assistance: the annual exclusion rose from $5,000 to $7,500 for 2026 ($3,750 for married filing separately).
Commuter benefits
- 2026 monthly exclusion: $340 for transit passes and vanpools combined, and $340 for qualified parking.
Common post-tax deductions
- Roth 401(k) contributions. Taxed now, with qualified withdrawals tax-free later. They count toward the same $24,500 deferral limit as traditional contributions.
- Roth catch-up for higher earners. Under SECURE 2.0, an employee whose prior-year FICA wages from the plan sponsor exceeded $150,000 must make 2026 catch-up contributions as Roth. Final IRS regulations generally apply from 2027, but plans may apply the rule earlier in good faith, so check how your plan and payroll provider handle it.
- Wage garnishments. Child support orders, creditor garnishments and tax levies are taken from pay after taxes are calculated.
- Union dues, where a collective bargaining agreement provides for payroll deduction.
- Charitable payroll giving, which the employee may be able to claim on their own return rather than through payroll.
- Voluntary benefits not offered pre-tax, such as some supplemental life or disability coverage, and repayment of employee loans or advances.
How garnishment limits are calculated
Garnishments are a post-tax deduction with a legal ceiling. Under the Consumer Credit Protection Act, the limit is based on disposable earnings: pay left after legally required deductions such as federal, state and local taxes and the employee's Social Security and Medicare. Voluntary deductions like 401(k) contributions and health premiums are not subtracted when figuring disposable earnings.
- Ordinary garnishments: the lesser of 25% of disposable earnings, or the amount by which weekly disposable earnings exceed 30 times the federal minimum wage. At $7.25 an hour, that floor is $217.50 a week.
- Child support and alimony: up to 50% of disposable earnings if the worker supports another spouse or child, 60% if not, plus 5% more for payments over 12 weeks in arrears.
- Federal tax levies and bankruptcy orders follow their own rules.
State laws can set lower limits, so follow whichever is more protective of the employee.
Worked example: one paycheck at a Tampa dental office
Renee is a dental hygienist at a small practice in Tampa, paid $2,400 every two weeks. Florida has no state income tax, which keeps the arithmetic to federal items. Her deductions:
- Health premium through the cafeteria plan: $90 (pre-tax)
- Traditional 401(k), 6% of pay: $144 (pre-tax for income tax only)
- Supplemental life insurance she chose to pay after tax: $12
- A child support withholding order: $250
- Federal income tax wages: $2,400 − $90 − $144 = $2,166. Her W-4 produces federal income tax withholding of, say, $190 on that amount.
- Social Security and Medicare wages: $2,400 − $90 = $2,310. The 401(k) does not reduce these.
- Social Security: $2,310 × 6.2% = $143.22. Medicare: $2,310 × 1.45% = $33.50 (rounded).
- Disposable earnings for the garnishment check: $2,400 − $190 − $143.22 − $33.50 = $2,033.28. The $250 order is far below the 50% or 60% ceiling.
- Net pay: $2,400 − $90 − $144 − $190 − $143.22 − $33.50 − $12 − $250 = $1,537.28.
What did pre-tax treatment buy her? The $90 premium avoided Social Security and Medicare as well as income tax, saving $6.89 in FICA alone this paycheck, and the practice saved a matching $6.89 of employer tax. The $144 401(k) contribution saved income tax at her marginal rate but no FICA. The $12 and $250 changed nothing about her taxes; they simply came out of the money she had left.
Imputed income: the reverse of a deduction
Some benefits add to taxable wages instead. The clearest example is group-term life insurance: employer-paid coverage up to $50,000 is excluded, but the cost of coverage above $50,000, less anything the employee paid toward it, is included in wages in boxes 1, 3 and 5 of the W-2 and shown in box 12 with code C. Payroll needs to add it even though no cash changes hands.
Common payroll deduction mistakes
- Exempting 401(k) deferrals from FICA, which understates Social Security and Medicare wages.
- Running health premiums pre-tax without a written cafeteria plan in place.
- Letting an employee exceed the 2026 deferral or FSA limits after a mid-year job change or salary increase.
- Calculating garnishments on gross pay instead of disposable earnings.
- Treating Roth contributions as pre-tax because they sit in the same 401(k) plan.
hellobooks< / a > -keeps-deductions-straight-in-the-books">How HelloBooks keeps deductions straight in the books
Payroll deductions create liabilities you owe to someone else, whether a 401(k) provider, an insurer or a child support agency, and they need to clear on time. HelloBooks does not calculate payroll. If you run payroll in HelloTime (TimeX), the HelloBooks sister product, each pay run syncs into HelloBooks with the withholding and deduction liabilities in their own accounts. When you pay the 401(k) provider or the state disbursement unit, bank feeds and find and match clear the liability, the balance sheet shows anything still owed, and the general ledger gives your accountant a clean trail when they check year-end W-2 totals against the books.
This is general information about US payroll deductions as of November 2026, not tax or legal advice; check IRS Publications 15 and 15-B, your plan documents, or a CPA or payroll professional for your situation.
