| Deduction Type | Description | Effect on Taxes |
|---|---|---|
| Section 125 | Section 125 deductions refer to pre-tax contributions made by employees under a Section 125 plan, also known as a Cafeteria Plan. This section is part of the U.S. Internal Revenue Code (IRC) and allows employees to choose between receiving taxable cash or tax-free benefits. Costs for accident or disability income insurance, liability insurance including general and automobile liability insurance, supplement to liability insurance, hospital indemnity, other fixed indemnity or coverage only for a specificized disease or illness that are includable in the employees’ gross income. Section 125 contributions will be mapped to Box 14 on the W-2. | Pre-Tax |
| Health Savings Account (HSA) | A health savings account (HSA) is a tax-advantaged medical savings account enrolled in a high-deductible health plan. Funds accumulate and can be used to pay for qualified medical expenses without tax liabilities. HSA contributions will be mapped to Box 12W on the W-2. | Pre-Tax |
| Traditional 401(k) | A 401(k) plan is a tax-qualified, defined-contribution pension account that provides for pre-tax retirement savings. 401(k) contributions are mapped to Box 12D on the W-2. | Pre-Tax |
| Roth 401K | A Roth 401(k) plan is similar to the 401(k) plan, but where employees contribute post-tax funds and can withdraw tax free given certain criteria. Roth 401(k) contributions are mapped to Box 12AA on the W-2. | Post-Tax |
| Roth IRA | A Roth IRA is an Individual Retirement Account to which you contribute after-tax dollars. While there are no current-year tax benefits, your contributions and earnings can grow tax-free, and you can withdraw them tax-free and penalty free after age 59½ and once the account has been open for five years. Roth IRA contributions are mapped to Box 14 on the W-2. | Post-Tax |
| Simple IRA | A Savings Incentive Match Plan for Employees Individual Retirement Account (SIMPLE IRA) is a tax-deferred employer-provided retirement plan that allows employees to set aside money and invest it to grow for retirement. Simple IRA contributions are mapped to Box 12S on the W-2. | Pre-Tax |
| 403(b) | A 403(b) plan is a retirement savings plan available to qualified non-profit groups. It has a tax treatment similar to a 401(k). 403(b) contributions are mapped to Box 12E on the W-2. | Pre-Tax |
| Employer Sponsored Health Coverage | A benefit belonging to a Section 125 Cafeteria plan that helps employees pay for qualified expenses related to medical, dental, and vision care. Employer Sponsored Health Coverage contributions are mapped to box 12DD on the W-2. | Pre-Tax |
| Dependent Care Benefit | Dependent care benefits are a series of benefits that employers may choose to offer employees to help them with the costs of caring for family members or those who rely on them for care. These benefits can be used to reduce the cost of daycare, after-school care, elder care, and more - as long as the costs are work-related. Dependent Care Benefits are often a form of an Flexible Spending Account (FSA). Dependent Care Benefit contributions are mapped to Box 10 on the W-2. | Pre-Tax |
| Garnishment | A garnishment is a court-mandated withholding of an employee’s earnings from a paycheck for use toward debts. Common sources include child support, federal debt, state debt, student loans, and credit card debt. This serves as a post-tax deduction. Garnishments are not reported on the W-2. | Post-Tax |
| Miscellaneous | A type for a generic post-tax deduction on the employee check. Miscellaneous deductions are not reported on the W-2. | Post-Tax |
Payroll
Deduction Types
Below are brief descriptions of Zeal-supported deductions and how they are taxed.
You can see how to use Deductions in payroll in the Deductions Guide.