Are you inadvertently throwing away money? If you aren’t leveraging pre-tax deductions when setting up payroll taxes for your small business, you very well might be.
As a small business owner, you know you need to be looking for ways to help your small business wherever you can. Chances are, many of your employees feel the same way. Maximizing savings with pre-tax deductions is an excellent way for both you and your employees to save money. But how do you know which deductions you’re missing out on?
If you’re looking for smart ways to pay yourself as a small business owner, this post will cover some of the pre-tax deductions you should be aware of for your business and your employees. Leveraging these savings can result in thousands of dollars padding your bottom line each year. So, what are you waiting for? Let’s dive in.
How Can You Maximize Savings with Pre-Tax Deductions?
The best thing about pre-tax deductions is that the savings are a win-win for both you and your employees. Any pre-tax deduction that saves your employees on taxable income will also save you when it comes to your payroll taxes.
You know the benefits of pre-tax deductions, but how can you ensure you’re making the most of them? We will outline four significant categories of deductions you should be exploring for your business. Still, to save the most money you can, you will want to partner with a payroll service that can answer your questions and help you maximize your savings.
ConnectPay partners your business with payroll and tax professionals who are experts in local taxes and regulations. With the help of our team, you can figure out your business taxes and be confident that you are maximizing your savings through pre-tax deductions. Schedule a call with ConnectPay today to see how we can solve all your payroll problems.
Retirement savings plans are some of the most commonly considered pre-tax deductions for most employers. 401(k)s, Simple IRAs, SEP IRAs, and more qualify for pre-tax contributions. When implementing retirement savings plans, make sure you understand pre-tax and after-tax 401(k) plans and more.
Employees can also deduct healthcare expenses pre-tax. The most common pre-tax healthcare-related deduction is the insurance premium for healthcare coverage offered through your organization.
Other healthcare expenses that can be deducted pre-tax include Flexible Spending Accounts (FSAs) and Health Reimbursement Accounts (HRAs). These accounts allow employees to deduct funds from their paychecks pre-tax. They can then use these funds for carefully outlined medical costs.
Some additional healthcare expenses that can be deducted pre-tax are dental care, eyeglasses, prescriptions, and more.
Dependent Care Expenses
Employees can also deduct funds for dependent care expenses pre-tax. Employees can place these deductions in a Dependent Care Flexible Spending Account (DCFSA).
A DCFSA works similarly to an HRA in that the employee elects to place a certain amount of money per paycheck into the account. They can then use these funds for specific expenses associated with dependent care.
Some eligible expenses include daycare, nannies, and day camps for children. Employees can also use these funds for in-home care, nursing services, and other elder-care costs.
The last pre-tax deduction category is less commonly considered. In addition to healthcare and childcare expenses, your employees can deduct their monthly commuting costs before taxes.
These deductions are most often used in urban and downtown areas. Pre-Tax Commuter Benefits allow an employee to deduct up to $265 per month from their paycheck pre-tax to cover the cost of things like public transit, parking, or ride-share services.
Start Maximizing Your Savings with Pre-Tax Deductions
Maximizing savings with pre-tax deductions is an easy way to boost your business’s bottom line without sacrificing anything on behalf of you or your employees. What’s more, encouraging employees to make the most of these deductions provides them with a benefit.
Are you wondering what other payroll-related savings or tips you may be missing out on? Partner with ConnectPay for your payroll needs. Our tax team will provide you with unparalleled service, and we will connect you to experts in matters like workers’ comp and accounting to ensure you’re maximizing savings wherever you can.
Schedule a consultation today to see how ConnectPay can answer all your tax and payroll questions!