Health Benefit Adjustments

• Pretax health benefit payments help employees buy more health care coverage for their money. Employees purchase benefits before any federal or state tax deductions, so fewer dollars buy the same amount of insurance coverage. Spending pretax dollars reduces the employee's gross pay, shrinking his taxable base and reducing the amount of payroll tax paid by both him and his employer. The IRS also allows payments into health savings accounts, in which upfront payments of pretax dollars take care of the year's health care expenses not covered by insurance. Other pretax deductions include adoption assistance and dependent care assistance costs. Volunteer firefighters and emergency medical responders may also receive pretax health benefits, although the IRS does not require these employer-granted benefits to count as income.