Section 125 Plans

Maximizing Tax Savings with Section 125: The Basics

Let’s be honest: Nobody likes taxes. But with a Section 125 Plan, you can lower your taxable income and keep more of what you earn. Here’s how it works: Section 125 plans allow you to make pre-tax contributions toward things like healthcare, dental, and dependent care.

This means that instead of paying taxes on your entire paycheck, you only pay taxes on the portion left after your Section 125 deductions. The result? You get more money in your pocket at the end of the day!

What Can You Contribute to a Section 125 Plan?

• Health insurance premiums: Your portion of the premium gets deducted before taxes.
• Flexible spending accounts (FSAs): Contribute to FSAs for health-related expenses and reduce your taxable income.
• Dependent care: Use pre-tax dollars to pay for child or dependent care, saving you even more.

Maximize Your Contributions

To get the most out of your Section 125 plan, be strategic about the benefits you choose. If you need healthcare coverage, a flexible spending account, or help with childcare costs, use the plan to contribute pre-tax dollars toward those expenses.

Is the Section 125 Plan Right for You?

If you want to pay less in taxes and take advantage of pre-tax benefits, the Section 125 plan is definitely worth looking into. It’s an easy, effective way to reduce your taxable income and increase your take-home pay.