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Unformatted text preview: rtax $$
Pretax benefits Benefits provided by your employer that are subject to payroll and income taxes such as Salaries Bonus Company car Aftertax benefits Benefits provided by your employer that are not subject to payroll and income taxes such as Company paid parking (employee paid parking reduces W2) Onsite health facilities Free air travel for flight attendants Company portion of health care costs
33 Illustration of Benefits & Taxes A flight attendant makes $30,000 per year, but receives free tickets for personal travel. This person takes 20 trips a year with free tickets = $500 each. This is a NON taxable employee benefit worth:
$500 x 20 = $10,000 After tax benefit Assume 25% tax rate ÷ (1 – tax rate) Divide to gross up Equals value of perk $13,333 Pretax benefit Annual salary $30,000 Pretax benefit Total compensation $43,333 Pretax benefit This is really a $43,333 job! 34 Benefits Can Be Worth Up to 50% of Your Base Salary Health insurance (a big issue) Your insurance premiums are paid with “pretax” dollars, meaning your W2 will be reduced Stock options or profit sharing plans
Other benefits including insurance, education, training etc.
Pension plans (if you can get one) 401K plans 35 What is a 401K Plan?
(Also Known as 403 (b) or 457 Plans) Allows employees to save for retirement and get a tax break
Allows employers to match employee contributions with no immediate tax due
All savings grow tax deferred
Amounts saved are taxed when withdrawn at retirement
Early withdrawal will trigger tax due Early withdrawal results in 10% penalty (except 457 Plans) 36 What is a 401K Plan?
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This document was uploaded on 02/12/2014.
- Spring '14