Day 23: Pay Check Deductions

By Zaneta Lowe  - bio | e-mail

COLUMBUS, GA (WTVM) --You may want to start by checking out those employee handbooks that you've possibly tossed to the side or even stuffed in a drawer at home somewhere. It could be hiding some savings."There are a wide range of things that folks can take advantage of these days that a lot of employers offer, says local accountant Scott Voynich. Voynich is talking about pre-tax savings. Money that you can have deducted from your paycheck before taxes are taken out.

One obvious choice is contributions to a 401-K or retirement account, especially if your employer offers a match. Even in this volatile economy, Voynich says contributing on the front end, can put more money into your pocket in the long run. For example, he says if someone put money away for 30 years, they'd bank up to 50-percent more than if it was placed in a taxable savings account.Dependent care accounts are another example. This can be used for child or elder care and offers employees the opportunity to stash away the amount of money they expect to spend use on those services.

"You have the opportunity to get it pre-tax and that means before income tax and before social security tax and those are two big bites that come out of the check,"Voynich says. While it depends on your income and tax bracket, Voynich says someone putting away five-thousand-dollars in a dependent care account, could double their savings compared to what they would get back from just deducting the same amount in income taxes. "I'm way ahead of the game as compared to what may be a 20-percent tax credit against a portion of that five-thousand dollars." Many employers also offer similar accounts for health care. Voynich says the only down side, pre-tax savings typically work on a use it or lose it basis.