Smart Ways a Section 125 Plan Can Reduce Employee Tax Burden
Managing payroll taxes is a growing concern for both employers and employees. Rising healthcare costs and increased living expenses make tax-saving strategies more valuable than ever. One effective solution is a section 125 plan, a tax-advantaged benefit structure that allows employees to pay for certain benefits using pre-tax income. By reducing taxable wages, this approach helps employees keep more of what they earn while maintaining access to essential benefits. This article explains how a section 125 plan works, why it lowers tax liability, and the smart ways employees can use it to reduce their overall tax burden. What a Section 125 Plan Is A choice-based benefit setup, sometimes called a section 125 cafeteria arrangement, gets its approval through the Internal Revenue Code. Workers pick among approved perks, then cover part of the cost using money that skips federal income tax, along with Social Security and Medicare withholdings. Instead of paying after taxes, they set as...