After-Tax Deduction

After-tax deductions—sometimes referred to as post-tax deductions—are payments that are automatically deducted from an employees’ income after taxes have been withheld.

Pre-tax deductions are withheld from an employee’s wages before they’re taxed while after-tax deductions are withheld from an employee’s wages after they’ve been taxed.

Because these deductions are removed from gross pay, pre-tax deductions reduce an employees’ taxable income. These types of deductions can include:

1. Employer-sponsored benefits like health insurance
2. Health savings accounts (HSAs)
3. Flexible spending accounts (FSAs)
4. Vision and dental insurance

After-tax deductions can be withheld from wages for a few different reasons. These include:

• State and federal income taxes
• Social Security payments
• Retirement deductions
• Medicare taxes
• Other benefits deductions

Some examples of after-tax deductions include Roth IRA contributions, 401(k)s, disability insurance, or garnishments.

Form W-2 is an official wage and tax statement issued by the IRS. Each year, employees receive their Form W-2 during tax season, which indicates how much money they earned in the previous year for a specific employer and how much money was withheld from these wages. Workers use this information to file their annual taxes.

The following deductions can be found on Form W-2:

• Taxable income – Box 1
• Federal income tax withheld – Box 2
• Income subject to Social Security taxes – Box 3
• Social Security tax withheld – Box 4
• Income subject to Medicare taxes – Box 5
• Medicare tax withheld – Box 6
• Other compensation and deductions from taxable income – Box 12
• State income tax – Box 17
• Local income tax – Box 19

Related Terms: Pre-Tax Deduction