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Pre-tax deduction happens before the taxes are calculated and deducted from the gross income. Here the taxable income would be less as the deduction happens before the tax gets calculated.
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Post-tax deduction happens after the taxes are calculated and deducted from the gross income. Here the taxable income would be more as the deduction happens only after the taxes are deducted.
Example: Gross income – $ 1000, 401(K) savings – $200, tax percentage – 2%
In case of Pre-tax Deduction, Net Earnings will be $ 784
Calculation: (Gross income – Pretax deduction) – tax deduction
= (1000-200) – 16
= 784
In this example, the pretax deduction (401 K Savings) is deducted before the tax is calculated on the gross income. The net gross available would be $ 800 after deducting $200 for 401 K savings. 2 % tax on $800 would be $16. So the net earnings will be $ 784 after deduction of tax.
In case of Post –tax Deduction, Net Earnings will be $ 780
Calculation: (Gross income – tax deduction) – Post tax deduction
= (1000 – 20) -200
= 780
In this example, the post tax deduction (401 K savings) is deducted after the tax is reduced from the gross income. 2% tax on gross income would be $20. After deduction of tax the net gross available is $ 980. Then after deducting the amount of $200 for 401k which is post tax deduction, the net earnings available will be $780.
Tell me Any Function modules for SAP HCM Post tax deduction and Pretax deduction for particular Health plan ??
my employer didnt pay me enough om my first pay..then he payed it me a couple of days after beacause he knew he payed me less than he should have..but on my next pay he toke post tax deducation off and said it was he payed me too much on my first pay.. whatt do i do
It would be good to consult some experts just like my friend consulted <a href="http://www.khr.ie/" rel="nofollow">KHR</a>
nice post thanks for sharing valuable information from <a href="http://www.yektek.com/sap-hr-online-training" rel="nofollow"> Swathi </a>
excellent post thanks for sharing from <a href="http://www.yektek.com/sap-hr-online-training" rel="nofollow"> Sankar </a>