What Is the Benefit of Paying Pre-Tax?

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Paying pre-tax has a variety of different benefits that you should be aware of. Find out about the benefit of paying pre-tax with help from a personal finance professional in this free video clip.

Part of the Video Series: Money Management
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Video Transcript

Hi, my name is Andrew Schrage, co-owner of Themoneycrashers.com, personal finance website and today we're going to discuss the advantages of paying for your medial benefits with pre-tax dollars and the main advantage here is tax savings, the reason being is when you pay for your medial benefits through your employer with pre-tax dollars, you can deduct the entire amount from your annual gross income at the end of the year which will significantly reduce your tax liability. On the other hand, if you paid for your medical benefits with post tax dollars you would only be able to deduct the amount that exceeds 7 and 1/2 percent of your annual gross income which will significantly increase how much you need to pay in taxes at the end of the year. Moreover, with this latter option you'll also have to deal with the timely process of itemizing your deductions on your tax return. Once again, this is Andrew Schrage, co-owner of Moneycrashers.com discussing the advantages of paying for your medical insurance premiums with pre-tax dollars.

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