After-Tax Deduction

HR Glossary for HR Professionals

Glossary of the most common HR terms and acronyms to assist professionals navigating the ever-growing and ever-changing world of HR terminology.

After-Tax Deduction

What Are After-Tax Deductions?

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.

What is the Difference Between Pre-tTax Deductions and After-Tax Deductions?

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

Types of Payroll Deductions

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.

Where to Find Deductions on Form W-2

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

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