125 Cafeteria Plan Deductions are classified as which under state taxes?

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Multiple Choice

125 Cafeteria Plan Deductions are classified as which under state taxes?

125 Cafeteria Plan deductions are taken before state income taxes are calculated. In a cafeteria plan, employee contributions for benefits are made with pre-tax dollars, which reduces the wages subject to state tax. That means these deductions are classified as PRE because they lower the taxable income for state tax purposes. They aren’t post-tax, nor are they simply exempt or not taxable, since the tax is still calculated on the reduced, pre-tax amount rather than on the full wage.

125 Cafeteria Plan deductions are taken before state income taxes are calculated. In a cafeteria plan, employee contributions for benefits are made with pre-tax dollars, which reduces the wages subject to state tax. That means these deductions are classified as PRE because they lower the taxable income for state tax purposes. They aren’t post-tax, nor are they simply exempt or not taxable, since the tax is still calculated on the reduced, pre-tax amount rather than on the full wage.

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